China is the new Germany. At the end of the Second World War, Germany was an “emerging market.” It was industrializing rapidly and producing brisk economic growth.

In April 2007, the stock market of the tiny island nation of Taiwan had just about everything going for it.

Investors have pulled $98 billion out of equity funds in the first quarter of 2008, according to Emerging Portfolio Fund Research (EPFR).

The Financial Times  describing the outflow of cash as “a record shift that accelerates a longer-term trend away from US and western European stock markets” caused by the credit crisis and subprime mess in the US.

“The outflows also accelerate a trend for investors to put their money either in ultra-safe cash options such as money market funds, or into riskier markets and high-fee products such as hedge funds,” according to the report. “They are abandoning the middle ground of mainstream equity and fixed income funds, especially in the developed markets.”

Investors pulled $70bn from US, Japan and Western Europe funds during the quarter. Funds with inflows were almost all focused on Taiwan, Russia, the Middle East and Africa.

The news from European and Asian markets is grim today.

“European shares have followed the lead from Asia and fallen in early trading, reports the BBC, “with investors troubled by signs that the US housing market is deteriorating.”

London’s FTSE 100, Frankfurt’s Dax and the Paris Cac 40 all fell by just over 1% in morning trade.