For commodities investors who want exposure to China, Jesper Dannesboe, senior strategist at Société Générale in London, has two words: buy copper.

The red metal, used very widely in electrical appliances, is traditionally considered a leading indicator for the health of the global economy. But in the past year it has become ever more finely tuned to the health of the Chinese economy.

Alex Heath, head of base metals at RBC Capital Markets, says that, not long ago, movements on the Shanghai Futures Exchange would be triggered by price movements on the London Metal Exchange.

“Now it's the other way round,” he says. “If Shanghai is down 2 per cent, we're down here.”

China accounts for about 40 per cent of global copper demand, up from about 25 per cent three years ago. Analysts differ sharply in their views on Chinese demand this year but the more bullish believe the country will contribute about two-thirds of growth in the world's demand for the metal this year.

Demand in China helped copper prices – in common with other base metals – to surge in 2009 and the first months of 2010, as its economy grew at a spectacular pace.

Copper gained 160 per cent between the start of 2009 and April 2010, hitting a peak of $8,043 a tonne in early April. But just as China has been the most significant growth story for base metals such as copper and bulk commodities including iron ore and coal, it has also become the main source of market jitters.

As Beijing launched fresh measures to cool the economy, copper suffered. Prices have fallen more than 2 per cent on each trading day following China's moves this year to curb lending, by increasing the level of reserves banks must hold.

Along with the eurozone debt crisis, jitters over these moves have seen copper falling sharply this month.

The fears over China are twofold: that measures to slow fast-growing property prices will have an impact on the construction sector and slow demand for metals; and that policies to tighten lending will leave Chinese traders struggling to finance their inventories, bringing a glut of unexpected metal on to the market.

While Chinese copper imports have surged in the past nine months, there is evidence that some is going into warehouses.

Richard Adkerson, chief executive of Freeport McMoRan, the world's largest listed copper miner, recently acknowledged the concern that “some of those imports [into China] are going into warehouses and that might affect imports later in the year”.

That may lead to lower prices in the near term, but most analysts see Chinese demand as an overwhelmingly positive story for the metals markets in the medium and long term.

Mr Adkerson says Freeport McMoRan is “very optimistic” about China in the longer term, while analysts at Macquarie believe that “in 12 months, we will look back at the upcoming three months as the opportunity to buy”.

The supply-side picture supports the bullish story. For copper, as with other base metals, the long lead-times in bringing new mines onstream mean that many analysts expect demand to outstrip supply in the coming years.

Developing new copper mines, and expanding existing ones carries a high capital cost, and analysts forecast little growth in global production in the near future.

The situation has been exacerbated by the Chilean earthquake in February, which, while not severely damaging the mining infrastructure, has diverted investment away from the sector in the world's largest producer.

Finally, the quality of copper ore being produced from existing mines is steadily falling. Rio Tinto, the world's fifth-largest copper miner, recently said its production would fall about 15 per cent in 2010 on the back of lower grades of mined ore. David Thurtell, metals strategist at Citigroup in London, says: “There's just not the supply becoming available that there needs to be.”

Beyond the copper market, the phenomenal growth of Chinese demand has also been a factor in bringing about fundamental changes in the pricing mechanisms of some of the metals and bulk commodity markets. Iron ore is the clearest example.

For 40 years the price of iron ore was decided by lengthy annual negotiations. But the surging price gave impetus to a push from the leading miners – BHP Billiton, Rio Tinto and Vale of Brazil – to renegotiate the annual benchmark system. In March, the breakthrough came: Vale and BHP struck a deal with Japanese and Chinese steelmakers to move to quarterly pricing linked to the spot iron ore price.

That leaves just alumina and fertilisers as the major commodities consumed by China whose price is still negotiated in long-term contracts.

But with producers of alumina pushing for a change in the system, that may soon change.