That trade surplus with the U.S.? China is using part of it to buy oil from the Russians. After the infrastructure is built, maybe the Chinese will just step in and take it.

BBC

Russia and China have signed a $25bn (£17.54bn) deal that will see Beijing supplied with oil from Siberian fields in exchange for loans to Russian firms.

China Development Bank will lend $15bn to Russian state oil firm Rosneft, and $10bn to pipeline firm Transneft.

In return Russia will supply 15 million tons – 300,000 barrels a day – of oil annually for 20 years.

China is the world’s second biggest oil importer, and has looked to diversify its imports away from the Middle East.

China’s exports fell more than expected in January, down 17.5% from a year earlier, marking the biggest drop in more than 10 years, figures have shown.

Imports were down 43.1% in the month compared with a year ago, as China’s economy continued to be hit by the global economic slowdown.

Analysts say the slowdown could prompt more factory closures and job losses.

China’s global trade surplus widened to $39.1bn last month, after recording a surplus of $39bn in December.

BBC

The Ponzi scheme that is the Chinese economy is gravely threatened. Exports cannot fall for any length of time or the cash flow necessary to keep the economy super stimulated dies. Commodity prices must remain low and supply high. And the tens of millions of rural Chinese who work in the “new” economy must remain content.

We are seeing a variety of challenges to these imperatives. Month to month, the Chinese may be able to manage but if any of these turn into a long term trend, watch out.

As I have predicted in the past, the reaction by the boys in Beijing will be violent. Taiwan and the Russian Far East are most at risk but internal crackdowns will also be in the mix.

Parts of China are experiencing their worst drought in half a century, threatening the water supply of millions of people and putting the winter harvest at risk, state media reported.

The dry spell has spread rapidly across seven key agricultural provinces, triggering calls from President Hu Jintao and other top leaders to step up support for the affected areas.

”The duration, scope and impact of the drought are rare,” said China Meteorological Administration chief Zheng Guoguang.

At least 3.7 million people and 1.9 million head of livestock are affected.

About 9.5 million hectares of farmland, representing 43 percent of the country’s winter wheat supplies, are also affected.

No rain has been forecast for the next 10 days.

The Standard Newspaper

China says 20 million migrant workers have lost their jobs during the economic downturn – three times greater than had been suggested previously.

A survey carried out in 15 provinces suggests around 15% of the total migrant labour pool is now unemployed.

Each year between five and seven million new workers from rural areas come to China’s biggest cities looking for work.

They join a migrant worker labour pool estimated at around 130 million.

There are fears that large numbers of unemployed workers could lead to social unrest.

BBC

China has used its trade surplus with the US to fund its military expansion and to pay for the 10% plus growth it claims for its economy. What happens when the money dries up?

China’s exports have dropped into their biggest decline in a decade.

Exports in December were down 2.8% from the same time last year, a bigger decline than November’s 2.2% drop, the China Daily said.

The numbers provided fresh evidence of a serious trade slump that has caused a wave of factory closures and staff layoffs, analysts said.

The communist leadership has expressed fears of social unrest as economic problems worsen.

BBC