WASHINGTON, Aug. 6 (UPI) -- The fall in the oil price to $118 a barrel sounded like good news to the world's markets, which all rose Tuesday. But it could be bad news, if the decline in demand signals that the slowdown is spreading from the "old" economies of the United States, Europe and Japan and starting to affect the "new" economies of the developing world.

That ominous prospect of a drift was explicitly forecast this week by Stephen Green, chairman of the HSBC banking giant, based in Britain but with its 19th century roots in Hong Kong heavily committed to China and other emerging markets.

"There is no way a serious downturn in the U.S. is going to leave China immune," Green warned Tuesday.

But China is generating its own troubles. Average wages are rising at 15 percent a year, more than 25 percent in the coastal boom towns and even more once the new labor-rights legislation is factored in. China's textile industry, already operating on razor-thin margins, is struggling to cope with low-wage competition from Vietnam and Pakistan. The renminbi currency has risen more than 20 percent against the dollar since the controls were relaxed in 2005. The most ominous indicator is that China's purchasing managers' index fell below 50 in July, which would suggest that output is set to fall. And property values are dropping fast, down 9 percent year-on-year in Beijing and down 19 percent in the southern city of Guangzhou.

In India, wholesale prices were rising at 12 percent last month, forcing the central bank to raise the costs of borrowing to 9.5 percent. That was the third rise since May, to little effect. Pakistan has also raised interest rates three times this year. Indonesia, Thailand and the Philippines have all increased interest rates in the past month.