The FTSE 100 has seen a significant drop down to 5,889.62, falling 1.46% as strong growth figures from China prompt monetary tightening concerns.
Fundsmith founder Terry Smith says China is the story for 2011 and warns the economy could be poised to 'fall over'.
London's leading share index was down 0.37% at 5,954.39 in early trading on Thursday, hampered by disappointing results from US companies and weakness in Asia.
Rising emerging market stocks have boosted the MSCI EM index to its highest level in two and a half years, on speculation China's inflation eased last month.
Commodities enthusiasts are investing five years too late, although gold may still be worth buying, according to Fidelity's Anthony Bolton.
China will overtake the US as the world's largest economy by 2018 as the global financial crisis propels the shift in economic power to emerging countries, says PricewaterhouseCoopers.
Fund manager heavyweights Hugh Hendry and Anthony Bolton have clashed on the outlook for China.
Fidelity is looking to raise £162.1m in a new share issuance on its China Special Situations trust, run by Anthony Bolton.