Investors should be compulsively checking the price of soybeans, not Spain's credit default swaps, for signs of trouble in the global economy.

A recent decline in commodities prices has been overshadowed by Europe's debt crisis, but it points to an equally worrisome development for markets: an end to the China growth machine.

Whether an ongoing slowdown there is a byproduct of euro-zone fears or an independent development, a ramping down of China's economic expansion would have far-reaching and negative consequences for the world economy. It would fundamentally alter the nature and direction of global capital flows. What is currently a commodities story would quickly spread to currency, credit and equity markets.

The slowdown's impact is already being felt harshly in key commodities markets where Chinese demand for building materials had until now driven spectacular gains. The prices for copper, nickel and iron ore--all critical ingredients in the country's strategy of industrializing at all costs--are down more than 23% each since their peaks in August. The same goes for soybeans, which China needs for animal feed.

Over the weekend, China reported import volumes surging for all these materials in November. But that pickup in demand was widely attributed to bargain-hunting by factories following the previous steep falls in prices and as producers prepared for the annual runup in production ahead of Chinese New Year in late January.

Those orders, some of which were likely placed in October, explain the brief bounce in prices that various commodities experienced either in the latter part of October or early November. And after that the declines came back with a vengeance. It appears that China is becoming more selective in the amount and timing of its buying, perhaps reflecting the burden of overcapacity that's arising in an economy whose construction-driven growth model is reaching its limit.

HSBC's purchasing managers index for China, a gauge of manufacturing activity, dropped to 47.1 in November, below the 50 level that signifies expansion. And inflation plunged to 4.2% from 5.5% in October, a move so big it suggests that the domestic economy is facing a glut of unsold goods.

The real risk, however, lies in real estate. By some measures, property development accounts for 70% of Chinese economic growth. That, until now, has been the true force behind China's voracious demand for steel, copper, cement and lumber.

But this construction machine requires sales to sustain itself. And home sales are declining--down 3.3% year-on-year in November, following an 11.6% drop in October. The falls in Tier One cities such as Shanghai, Beijing and Shenzhen, were far steeper.

The idea that a housing bubble may be bursting is likely contributing to an outflow of capital that has pushed the yuan to the bottom of its trading band for nine consecutive days. Maybe the market now thinks the Chinese currency is overvalued, not undervalued.