It’s a question weighing rather heavily on the minds of established new media companies and entrepreneurial startups alike, VCs and their limited partners, placement companies, analysts, advertisers, agencies — hell, anyone whose lives and livelihoods are tied to the success of tech companies in China. How well insulated is China from the meltdown and the credit crunch to follow? You may have read about how storied VC Sequoia, one of the best-known of Menlo Park’s Sandhill Road VCs sounded a serious alarm a couple of days ago. That god among venture investors, Michael Moritz, evidently summoned the CEOs all of Sequoia’s portfolio companies — no indication whether that included those invested by Sequoia China like Comsenz or 56.om — and, with other partners, put serious fear into them and commanded them to focus singlemindedly on their bottom lines through cost-cutting and a sell-or-die attitude. (The Valleywag link above is a great read: it includes notes taken by one of the participants in that meeting).

Anyway, my own thoughts on how this will play out in China are still rather conflicted, but this morning I chatted with my friend David Wolf of Wolf Group Asia. David, if you read his excellent blog or have had the pleasure of hearing him speak publicly, is always an insightful and articulate observer of things tech in China. He thinks, as I do, that funding is going to get tight, at least in the short term. VCs — especially non-Chinese venture funds — are going to be parsimonious and will watch every penny. The portfolio companies that endure will, he says, be those focused on cashflow. “The speculative edge will come off the market for a while,” David told me, “but we’ll recover a lot more quickly [in China] once the panic subsides, and companies in China — especially those hat are focused on the domestic market — will look good. But we are in for a bit of a dip.”

This could be a real opportunity for local VCs with Renminbi-denominated funds to really step into the limelight, David suggested. “Entrepreneurs will stop thinking about the DFJs of the world, and will start looking for local money. It’s going to open the door for local venture capital. If I were on Sandhill Road I’d be concerned about this. Chinese funds will get superb pricing and a real boost to their profile.”

And what about the online ad market, which sustains (or, it’s hoped by startups, will eventually sustain) so many of China’s Internet companies? Here, the wise Mr. Wolf is sanguine, too. “There are people on the media side who know that online is the best value in advertising for your money, full stop. China’s problem is that we don’t have a lot of sophistication, both with agencies [surely he was thinking of other agencies, and not Ogilvy!] and on client side. The idea that you’d continue spending on TV and cut back online is ridiculous. They should recognize that the value in Internet marketing, especially outside of the big portals, is tremendous.”