The result seems a classic speculative bubble. People buy because they believe prices will go up; and prices go up because people buy. A 2010 survey found that 18 percent of Beijing households owned two or more properties; another 2010 survey of all cities found that 40 percent of purchases were for investment. Many units, Lardy reports, are vacant because rents in Beijing, Shanghai and other major cities are low.

It is hard to obtain good data in China, but something is wrong when the country’s Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control.

The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains.

The question is whether the People’s Bank can do any better than the US Federal Reserve or Bank of Japan at deflating a credit bubble.

Cell prices have fallen 59 percent since Dec. 27, according to Bloomberg New Energy Finance. Seven Chinese companies reported lower gross margins since yesterday and three said margins have moved into negative territory, an unsustainable level, said Hari Chandra Polavarapu, an analyst at Auriga USA in New York.

“Liquidation is leading to suicidal pricing.” Polavarapu said in an interview today. There are too many solar companies in China, he said, and they are cutting prices to maintain share. Chinese solar manufacturers expanded capacity faster this year while demand growth slowed in Europe, the top regional market.

Shipments from a politically stable country such as Canada will be a welcome diversification of supply sources as top consumers make plans to deal with a supply shock if tensions in the Middle East escalate and choke off Iranian exports, barely a year after markets coped with a disruption from Libya.

Canada’s plan to ship crude to Asia got a boost after Prime Minister Stephen Harper said his nation would step up efforts to supply the region after the United States delayed a decision on a pipeline supply link.

Canada’s oil sands output is expected to double by the end of this decade from 1.5 million barrels per day (bpd) now, according to IHS Cera, close to Libya’s exports before a civil war disrupted output this year.

The 40-page report, released by the bank and the Hurun Research Institute, revealed that 14% of millionaires in 18 cities across China have either applied or are in the process of applying for migration to other countries. It also showed that nearly one-third of them own foreign asserts and a similar number were planning to invest abroad.

The Communist Party is now struggling to cope with the fall-out. On Monday, the state investment fund Central Huijin began buying stakes in China’s four top banks to restore confidence and halt the slide in share prices.

China’s finance ministry is quietly intervening to underwrite China’s railway system. This behemoth is drowning with $300bn of debts after breakneck expansion, is in arrears on $25bn of debts to its two largest suppliers and has run out of money to pay workers on the Lanzhou-Chonqing rail project.

Muhtar Kent, Coke’s chief executive, said “in many respects” it was easier doing business in China, comparing the country with a well-managed company. “You have a one-stop shop in terms of the Chinese foreign investment agency and local governments are fighting for investment with each other,” he told the Financial Times.

Mr Kent also pointed to Brazil as an example of an emerging economy that is making itself attractive to investment in ways that the US once did. “They’re learning very fast, these countries,” he said. “In the west, we’re forgetting what really worked 20 years ago. In China and other markets around the world, you see the kind of attention to detail about how business works and how business creates employment.”

China, the largest foreign holder of U.S. federal debt, blamed « short-sighted political wrangling in Washington » for creating the current financial morass that now threatens to undermine the global economy.

« China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets, » the commentary said.

Sulfur particles in the air deflect the sun's rays and can temporarily cool things down a bit. That can happen even as coal-burning produces the carbon dioxide that contributes to global warming.

"People normally just focus on the warming effect of CO2 (carbon dioxide), but during the Chinese economic expansion there was a huge increase in sulfur emissions," which have a cooling effect, explained Robert K. Kaufmann of Boston University. He's the lead author of the study published Monday in Proceedings of the National Academy of Science.

Chinese coal consumption doubled between 2003 and 2007, and that caused a 26 percent increase in global coal consumption, Kaufmann said.

‘In our opinion, the United States has already been defaulting,’ Guan Jianzhong, president of Dagong Global Credit Rating Co Ltd, the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.

Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies – eroding the wealth of creditors including China, Mr Guan said.

The US government will run out of room to spend more on August 2 unless Congress bumps up the borrowing limit beyond US$14.29 trillion (S$17.57 trillion) – but Republicans are refusing to support such a move until a deficit cutting deal is reached.

Ratings agency Fitch on Wednesday joined Moody’s and Standard & Poor’s to warn the United States could lose its first-class credit rating if it fails to raise its debt ceiling to avoid defaulting on loans.

When the price and availability of energy start to dominate your business plan, you say goodbye to your inexpensive Chinese labor force, and pack up and leave.

Of course, not everybody can leave. Those that stay are bracing for what China’s Electricity Association is warning will be the nation’s largest power shortage in years this summer. As many as 20 provinces and territories have already been put on power rationing, including the country’s industrial heartland.

The provincial government in Zhejiang, a manufacturing hub close to Shanghai, has notified 44 major industries about limits on their power consumption. Companies that exceed these limits face prohibitive power tariffs that would threaten much of the region’s low margin manufacturing. The story isn’t any different in Guangdong, south China’s manufacturing hub. Its industries must also cope with limits on power usage.

Today, Liu Zhijun is ruined, and his high-speed rail project is in trouble. On Feb. 25, he was fired for “severe violations of discipline” — code for embezzling tens of millions of dollars. Seems his ministry has run up $271?billion in debt — roughly five times the level that bankrupted General Motors. But ticket sales can’t cover debt service that will total $27.7?billion in 2011 alone. Safety concerns also are cropping up.

Liu’s legacy, in short, is a system that could drain China’s economic resources for years. So much for the grand project that Thomas Friedman of the New York Times likened to a “moon shot” and that President Obama held up as a model for the United States.

Official figures released on Sunday show that the world’s biggest exporter posted a trade deficit of just over $1bn for the first three months of the year.

Surging prices for commodities – as well as strong demand for imported consumer goods such as cars for China’s growing middle classes – were responsible for pushing up the country’s import bill. « The value of imports in the first quarter hit a record high for the first time of more than $400bn, » the government said.

But the interview just caps what was already a big week for the Chinese currency.

For example, China said for the first time that it will low foreign investors to participate in yuan-denominated private equity vehicles.

On Tuesday the Bank of China said it would enable yuan trading for US investors.

Last Friday, China greenlighted the first foreign investments in its banking sector in years, as JPMorgan and Morgan Stanley won permits.

Meanwhile, the first-ever yuan-denominated hedge fund will be launched by Pharo Management.

The comments by Vice Premier Li Keqiang were made in an op-ed piece in Spain’s leading daily El Pais one day ahead of his arrival in Madrid for a three-day official visit, the start of a European tour that will also include Britain and Germany.

« Since China is a responsible investor country in the long-term on the European financial markets, and in particular in Spain, we have confidence in the Spanish financial market, which has been translated into the acquisition of its public debt, something we will continue to do in the future, » he said.

Chinese state media on Monday also quoted Beijing’s ambassador to Madrid as saying China is willing to make « positive efforts » to help Spain with its economic recovery.

Moscow securities exchange is scheduled to open direct trading between the Chinese currency, the renminbi, and the Russian ruble. If the market develops, it could eventually cut the dollar out of a portion of Russian and Chinese trade.

Although China’s business with Russia is only a sliver of what it does with the United States, there is room to grow: Russia is the world’s largest energy exporting nation, and China a big consumer as the world’s second-largest economy, behind the United States. And yet when a railroad tanker of Russian oil crosses the border into China, the transaction is settled in dollars.

The new currency exchange is meant to start changing that. The trading system will operate through the Moscow Interbank Currency Exchange, or Micex, which is Russia’s largest stock exchange and also handles foreign currency transactions. It will be the first trading in the Chinese currency outside mainland China and Hong Kong.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.

He suggested the prize should not have gone to Liu Xiaobo, who has drawn praise from Western governments as an advocate of gradual political change without any violent confrontation with Chinese leaders.

Speaking in his weekly radio and television program, Chavez scoffed at his Venezuelan political opponents who praised the giving of the peace prize to Liu. Chavez said the opposition’s support for the prize showed that « they are lackeys » of the West. « They are worse than the Yankees. »

« Our greetings and solidarity go to the government of the People’s Republic of China, » Chavez said, adding: « Viva China! And its sovereignty, its independence and its greatness. » The Chinese government reacted angrily to the announcement of the peace prize for Liu. It said the Norwegian Nobel Committee violated its own principles by honoring a « criminal. »

Speaking at The Independent Woodstock Literary Festival, Frank Dikötter, a Hong Kong-based historian, said he found that during the time that Mao was enforcing the Great Leap Forward in 1958, in an effort to catch up with the economy of the Western world, he was responsible for overseeing « one of the worst catastrophes the world has ever known ».

Mr Dikötter, who has been studying Chinese rural history from 1958 to 1962, when the nation was facing a famine, compared the systematic torture, brutality, starvation and killing of Chinese peasants to the Second World War in its magnitude. At least 45 million people were worked, starved or beaten to death in China over these four years; the worldwide death toll of the Second World War was 55 million.

The nation’s holdings of long-term Treasuries fell in June for the first time in 15 months, dropping by $US21.2 billion to $US839.7 billion ($940 billion), a US government report showed yesterday. Two-year yields headed for a fifth monthly decline in August, falling today to a record 0.48 per cent.

« Buying now is a big risk, » said Hiroki Shimazu, an economist in Tokyo at Nikko Cordial Securities, a unit of Japan’s third-largest publicly traded bank. « I don’t recommend it. »

China will improve foreign-exchange policies related to the gold markets, the central bank said in a statement today on its website. The statement didn’t give a timeframe. The government is also studying allowing foreign suppliers to deliver bullion directly to the Shanghai Gold Exchange, it said.

« The Chinese central bank is liberalizing the gold market step by step and this is the latest move, » said Ellison Chu, managing director at the precious-metals desk at Standard Bank Asia Ltd. in Hong Kong. « It will allow more foreign participation in China’s growing gold market and it will also help China to be more integrated into the global gold-trading system. »