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Earlier this summer it was for very sad reasons, as the earthquake in Sichuan province claimed thousands of lives. Soon it will be for much happier reasons as the Olympics get started in Beijing. The general public will be treated to hours of TV footage and columns of newspaper inches not just on sporting success and failure, but on how China is changing, becoming more materialistic and what that means for the rest of us.

Of course, in the financial markets many have become increasingly fascinated, if not obsessed, with China for some time. China has become one of the world’s biggest exporters – and importers. In recent years it has been largely responsible for the increase in commodity prices. Indeed, while the initial emergence of China as a large global player in the manufactured goods market meant it was a force for deflation, today’s China-led increase in oil and other basic material prices means it is an exporter of inflation.

That inflation is affecting us all and has led, over the last few weeks, to a change in rhetoric on the part of central bankers in the US, the eurozone and the UK. It is even becoming possible that interest rates will rise, as the Fed, the ECB and the BoE fight to keep inflation under control. That is not a very encouraging thought for investors in either bonds or equities.

It is also nonsense to think that, without the co-operation of China and other emerging markets, they can control inflation. The root cause of higher global prices is rampant liquidity growth in emerging markets, which is itself caused by central banks intervening in foreign exchange markets to keep their currencies competitive. In doing so they acquire foreign exchange reserves and boost their own money supply. China has in excess of $1.7trn (£870bn) of foreign reserves now. The liquidity boosts growth, keeps domestic interest rates low and is now leading to a generalised increase in inflation. According to the IMF, global inflation was 5.7 per cent at the end of Q1 – the highest since 1991.

What is needed is tighter monetary policies in emerging markets. That means higher interest rates and stronger currencies relative to the dollar, the euro, the yen and sterling. Until that happens liquidity growth will remain strong and inflation will remain with us, even if it is concentrated in food, energy and other basic materials. The longer it goes without this kind of policy response the greater the risk of the Bank of England and others raising interest rates – even when growth is slowing down. It could be a long summer, but at least we have the Olympics to look forward to.