It’s a story about the tail that wagged the dog that didn’t bark that isn’t in Kansas anymore. The dog that didn’t bark is commodity prices, and the tail that wagged is the Chinese yuan.

Financial markets this week revealed an historic shift away from an America-centered world economy. What is supposed to happen when central banks tighten – what used to happen – is that commodity prices drop along with emerging markets stock and equities. The Federal Reserve is supposed to – or used to – set the pace for global monetary policy.

Something different happened—in fact, something we haven’t seen before.  As bond yields spiked in the industrial world, led by Frankfurt rather than Washington, commodity prices rose. That’s because world demand at the margin no longer depends on the United States. World trade growth is weak in the industrial world and robust in emerging Asia. China is the marginal buyer of oil and industrial metals. China was supposed to be the source of risk in the world economy. Instead, it is an anchor of strength.

This is the first tightening cycle in which the impetus came not from the US Federal Reserve, which presides over the world’s main reserve currency, but from Europe.

German-US 10-year yield

Remarkably, bond yields in the world’s second-largest economy (on a dollar basis) or largest (on a purchasing power parity basis) have been falling:

China bond yields fall

Strength in China’s currency corresponded to strength in raw materials. Shown below are oil, industrial metals prices (the S&P/Goldman Sachs index), and the yuan during the past five trading days as a time series (with normalized values).

CNY-USD oil and metals index

Here is the same data presented in a scatter chart:

CNY vs oil and metals

That is remarkable, considering that preponderant Western opinion held until recently that the Chinese currency was a source of risk. Hedge fund manager Kyle Bass bragged that he was short the yuan. Instead, China’s currency is an anchor of stability. China’s capital outflow of 2016 worried analysts who neglected to notice that Chinese companies were paying down dollar debt on a massive scale. Once the Chinese private sector adjusted its balance sheet, the outflows stopped. The People’s Bank of China meanwhile has made considerable progress in reducing the volume of high-risk “wealth management products” and other shadow banking instruments.

Two economic factors should be kept in mind. The first is that China is still importing vast amounts of oil, and almost certainly is the marginal price-setter in the market.

Exponential growth of China oil imports

The second is that Asian trade is booming while world trade is stagnating—which is to say that at the margin, Asia is creating a great deal of its own demand. Intra-Asian trade is growing much faster than world trade. As the following charts show, imports of emerging Asian countries grew more than 10% year-over-year as of April 2017, while imports of industrial countries grew by less than 2%.

World Imports, EMs

World Import change yoy

If this isn’t quite de-coupling, it nonetheless is a degree of independence we never have been before. Welcome to a new world.