The Beijing Olympic Games begin August 8. The Chinese Government has been fervently preparing their country for the world spotlight of these Games. One thing the Chinese desire in general is harmony, or at least the appearance of it.

Do the Chinese have a strong interest in dampening crude oil prices and in general boosting world stock markets ahead of the Games? I would say, yes -- a raising of world spirits due to a decrease in oil prices ahead of the games would seem to be in their best interests. Whether they single-handedly have the power and financial wherewithal to do so is open to debate.

I do understand that China keeps internal price limits on gas prices, but I am asserting that they have an incentive to lower world oil prices and boost stock markets in general ahead of their Games. Certainly the FTSE/Xinhua China 25 Index could use a morale boost. The FXI seeks to emulate the performance of this Index. Check its performance since October 2007 on the following graph:

iShares FTSE/Xinhua China 25 Index - FXI 10/01/07 to Present


I certainly view the long-term prospects of China's economy and stock market as very, very bright. Demographics don't lie, and the big picture long-term trends are strongly in the favor of Chindia over the E.U. and U.S. Over the shorter-term they certainly can become overheated at times on pure speculation and will correct, as they have done over the past nine months. But over the long-term, I am confident that indices such as FXI will be up. And hopefully, China will seek to contribute to oil prices dropping and stock markets rising as we lead into the August Olympics.

Price Headley is the founder and chief analyst of BigTrends.com.