We’ve mentioned the red hot stock market in China in PBB more than once of late — primarily because it’s gyrations and overheated condition have contributed to the two Chinese airline stocks we follow performing in a similar fashion, i.e, jumpy, volatile, and overheated.

For those paying attention, it was also interesting to note that China’s consumption of oil was actually much lower for the last six months of 2006 than had originally been forecast.

Good news for us — but a sign that perhaps the overheated Chinese economy was hitting some bumps along the superhighway of economic froth.

Today — in case you’re wondering why Wall Street is having such a bad day — there’s one big reason. The falling stock market in China.

The Shanghai Composite Index, which tracks shares listed on the larger of China’s two stock exchanges, tumbled 8.8% to 2,771.79 before closing Tuesday. The decline rank as its biggest single-day drop since the benchmark plunged 9.4% on Feb. 18, 1997, which reportedly came after the death of reformist Communist Party elder Deng Xiaoping.

As for Wall Street, as of 2:46 ET, the Dow Jones Industrials are down a hefty 260 points, or just a little more than 2%. As for the airline sector, it’s a sea of red with no airlines up on the day as of this writing.

Meanwhile, the price of oil is hanging around 61.60, after having been as high as 62.25 in intra-day trading.