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

The mainland said on Wednesday [January 7 2009] that it will continue pushing forward dialogue and consultation with Taiwan in the new year by “firmly holding the main theme of peaceful development of the cross-Straits relations”.

Yang Yi, spokesman of the State Council’s Taiwan Affairs Office, made the remark at a press conference here.

Yang spoke highly of the recent speech of Hu Jintao, general secretary of the Communist Party of China Central Committee, at a December 31 workshop to mark the 30th anniversary of the mainland’s “Message to Compatriots in Taiwan”.

Hu’s speech summed up 30 years’ experience in developing cross-Straits relations in a comprehensive way, and he made a series of new proposals to develop the relationship, according to the official.

“This important speech is of great significance for us to accomplish Taiwan-related work and open up a new situation in the peaceful development of the cross-Straits relations,” the official said.

Yang discussed progress in developing cross-Straits ties in 2008.

Last year, the ties began entering the track of peaceful development as the pro-independence force failed in a “memorandum” on Taiwan joining the United Nations.

Also, the Taiwan situation showed positive changes, he said, without further elaboration.

Last year, the two sides lifted a decades-long ban on direct trade, mail and transport links; Taiwan compatriots gave selfless support to the quake survivors in the mainland; a pair of pandas arrived in Taiwan as a mainland gift and the mainland announced new measures to deepen cross-Straits cooperation and deal with the global financial crisis, according to the official.

The spokesman said that the mainland has always attached great importance to giving financial assistance to Taiwan-funded companies in the mainland. As of the end of 2007, mainland banks had lent more than 700 billion yuan (102 billion U.S. dollars) to such companies.

Three mainland banks have also agreed to offer 130 billion yuan in new loans to Taiwan-funded companies in the next two or three years.

China Daily

The Chinese National Petroleum Company (CNPC) started work on a $3 billion oil project in Iraq on Friday, the first foreign firm to begin such work since dictator Saddam Hussein nationalised the industry decades ago.

A CNPC delegation formally opened the al-Ahdab oi field project in Iraq’s eastern province of Wasit, officials there said.

“It’s a significant event which signals the first contribution of a foreign company in developing Iraq’s oil fields for three decades,” Wasit governor Latif al-Tarfa told Reuters by telephone.

“The Chinese engineers have located the spot where they will construct a field work site, and all the company’s equipment will reach the southern port of Basra soon.”

Reuters

More at the link

Organised crime is on the rise in China, and courts across the country saw a 160% annual increase in gang-related crime in 2007.

“Gang-related crimes have become a threat to our social stability and the economy,” one un-named official from the Public Security Bureau told the China Daily.

“Murder, rape, robbery, kidnapping, assault… they dare do anything,” the official said.

He said the construction, transport and mining sectors were all areas that attracted gang crime, but warned that other industries were also increasingly being affected.

With the economic downturn, Chinese authorities are worried that the problem will get even worse, and the new campaign aims to make sure this does not happen.

The official said the authorities would “keep a close eye” on crime resulting from the slowing economy.

Migrant workers are the backbone of China’s economic success, and these farmers-turned-factory workers have been the first to feel the effects of the economic slowdown.

To make matters worse, more than six million students will try to enter China’s workforce during 2009, half a million more than last year.

As many as 10 million people are expected to lose their jobs, and thousands of factories have already closed, says the BBC correspondent in Beijing, Quentin Sommerville.

The government is expecting trouble during 2009, and China’s huge security apparatus is signalling it is prepared to crackdown on anything that disrupts social stability, our correspondent says.

BBC

The numbers are huge, but in China they are still a small percentage of the overall workforce. That is, if the reports are accurate and not understated. The potential for a civil backlash is growing.

Nearly 5 million migrant workers had returned home by the end of November, accounting for 5.4 percent of rural migrant workers, the Ministry of Human Resources and Social Security said.

Many of them had lost their jobs as the global financial crisis took its toll across the country.

The 4.85 million migrant workers were mainly from 10 provinces including Sichuan, Hebei, Anhui, Jiangxi, Hubei and Hunan.

Meanwhile, employers in the provinces of Guangdong, Jiangsu, Fujian and Shandong, as well as Shanghai, have sacked 2.45 million people, accounting for 5.2 percent of the workforce in these areas, the ministry said.

Shanghai Daily

It is foolish to accept Chinese economic figures at face value. China remains a centralized communist state. It has no incentive to produce honest data on its economy, nor do the people in the trenches have any incentive to report the economic truth up the line to their superiors. Everything about the economy of China should be treated with suspicion.

As the risk of deflation looms large on top of weaker exports and declining private real estate investment, China’s economy may continue to slow down in the quarters immediately ahead but regain growth momentum in the second half of next year, according to a Morgan Stanley report released on Wednesday.

In its China Economics Outlook for 2009, the Hong Kong-based Morgan Stanley Asia forecast China’s baseline GDP growth would be around 7.5 percent next year, with the bull and bear scenarios projected at 9 percent and 5 percent respectively.

The projection came after the country’s economic indicators showed that the impacts from the global financial crisis on China’s tangible economy have become much severer.

The exports totaled $115 billion last month, down 2.2 percent year-on-year in the first monthly decline since June 2001, the General Administration of Customs said on Wednesday. The previous decline, a much smaller 0.6 percent, reflected slumping US demand after the tech bubble burst.

The producer price index (PPI), a measure of inflation at the factory level, decelerated sharply to an annual rise of 2 percent in November. It was also slowest rise for the PPI since May 2006, which prompted worries about the fast-slowing economy and rising deflation risks.

Late last month, the World Bank has revised down its forecast for China’s GDP rise of next year from 9.2 percent to 7.5 percent.

Wang Qing, Morgan Stanley Asia chief economist on the Chinese economy, said that three factors, namely the cooling-down in real estate investment, a massive de-stocking of raw material inputs in the immediate aftermath of the collapse of international commodity prices and the weakening external demand, had caused China’s economy to slowdown rather sharply.

The “triple-whammy impact” however could barely maintain its full force throughout 2009, although the ravage would likely continue to be felt though in the first quarter of next year, he said. “We believe that China’s economic outlook for next year is best characterized as getting worse before getting better, laying the foundation for a firmer recovery in 2010.”

As the fiscal stimulus package came much faster this time than that during the Asia financial crisis, Morgan Stanley expected the effect to be apparent by mid-2009. Besides, the slow recovery of the G3 economies — the United States, European Union and Japan– after the unprecedented monetary and fiscal policy actions might have led to an improving external demand by the second half of next year and thus would contribute to a modest recovery of the Chinese economy.

China Daily

China’s manufacturing output fell sharply in November, just the latest sign that the global economic slowdown is impacting on its economy.

The official purchasing managers’ index declined to 38.8 in November, from 44.6 in October, with any figure under 50 indicating a contraction.

The fall was caused by a sharp drop in new orders, especially from abroad.

China’s President Hu Jintao has warned that the global financial crisis is hitting the country’s competitiveness.

BBC

China uses a tremendous amount of coal. And they do not have the technology in place to burn it cleanly. You will also recall the frequent mine collapses that kill dozens or hundreds of miners each time.

After efforts by geological exploration teams for over a year, an ultra large coal field with a forecasted 23 billion tons of total reserve was found in the famous Turfan Basin in China.

Reporters learnt from the Department of Land and Resources of the Xinjiang Uygur Autonomous Region that, the newly-discovered coal field is located in the Sha’er Lake in Piqan County of Turfan Region in Xinjiang.

The coal mine occupies an area of over 300 square kilometers with a gross minable thickness of 169.69 meters, and a coal bearing ratio of 29%, with the largest coal bed being 141.91 meters thick in a single layer.

In China, a coal field with over 50 million tons of reserve is defined as an ultra large coal field. Sha’er Lake coal field has a forecasted reserve of 23 billion tons placing it into the category of an ultra large coal field at the national level. The People’s Government of Autonomous Region has now listed Sha’er Lake as the key coal exploration area in Xinjiang, and it will be deployed, explored and excavated with an overall plan.

Peoples Daily

More news about violence and turmoil in China.

Beijing officials routinely cite 8% GDP growth as the level needed to sustain employment. China’s growth rate is currently hovering around 9%, its lowest in seven years, and many expect next year’s figure to be lower. Efforts to boost GDP include Sunday’s announcement that the country will spend $1.4 trillion to stimulate the economy. Reliable unemployment figures are not available, but factory closures appear to be up: 67,000 small- and medium-size enterprises have shuttered in the first half of this year, according to government statistics. Thousands of workers at a diesel factory in Jiangsu province protested this month because of concerns over potential layoffs.

A closer look at what happened in Longnan last week shows why protests are likely to intensify as people become unhappier. The violence began when 30 people whose land had been seized as part of a government redevelopment scheme began to protest. Without an independent legal system, public protests are often the only recourse for people who feel they have been wronged.

Others joined in, until thousands filled the streets. Many were protesting a government plan to move their offices out of the city, which they felt would harm their livelihoods. After two days of riots, 71 police officers were injured and 22 cars were burned or destroyed, according to state media. It’s unknown how many protesters were hurt. Thirty protesters have been detained, but they won’t be privileged to fair trials.

Wall Street Journal

It is fair to say that most of the incidents of unrest in the Chinese population are never reported. It is difficult to estimate that number but it is safe to say that those reported have increased in number over the last several years. unrest in the population is one of the signs of the coming collapse of the current government.

Chinese leaders have finally admitted that the country is facing a “grim” situation on the employment front owing to the global economic crisis. An official survey has shown that demand for labour has fallen 5.5% in the third quarter of this year across 84 different cities.

Yin Weimin, head of the ministry of human resources said that labour discontent was a “top concern” of the government as the employment situation has turned “grim”.

The government is clearly worried that unrest among jobless workers would result in protest demonstrations and unruly scenes. The past weeks have seen strikes by taxi drivers in four cities and a workers’ riot at the party headquarters in Gansu province.

China has nearly 150 million migrant workers, who have left their rural homes in central and west China to work in the factories of South China. The extent of unemployment caused in factories cutting back production following loss of export orders is still not known. But the number might prove to be big enough to cause social tension, sources said.

Times of India

The recent weather problems, and crop failures, have begun to affect the Chinese economy.

BBC

Chinese inflation hit an 11-year high in January after rising price pressures were exacerbated by fierce snow storms, official figures show.
Soaring food prices were largely blamed for pushing consumer inflation up to 7.1% last month, from 6.5% in December.

Inflation in China continues to rise despite higher interest rates and other measures by Beijing to keep the economy from overheating.

The worst winter for decades hit food supplies, sending food costs up 18%.

Massive snowfalls wrecked crops and killed millions of livestock.

But analysts cautioned that the severe weather was not the only factor behind rising food costs, and warned that prices could still increase further.

The Chinese economy is a balancing act. All of the factors that support its massive growth have to be in balance or the economy is seriously threatened. To my surprise, it’s the weather and costs driven up by Chinese demand that are the problem.

Had I thought a little bit harder, I would have realized that the increase in world commodity prices caused by China’s overwhelming demand would eventually affect China. With various metals, oil and other commodities reaching record highs, China is now in a bind.

While China does not supply all its food needs, in many categories it is self-sufficient. Now, with their weather woes, the Chinese will be forced to supplement their internal production on the world market. At the same time they are already forced to buy other necessary food and materials for consumer use and to support infrastructure growth.

Is there enough money? And, how long will the Chinese people wait? Civil unrest is one of the signs I have predicted that will foreshadow either a general collapse of Chinese society, or war by the Peking regime to obtain more cash reserves and raw materials.

China is so big that effects that would stagger the United States have much less of a result. There is a tipping point for any country, no matter how large. It is unlikely that this is it, but it is certainly a sign of things to come.