Along with the rest of the world, the Chinese economy has slowed significantly, from close to 12% growth in the second quarter to just 9% in the third, and clearly heading lower.? As people continue to pour into the cities from the countryside, China needs to keep its job growth engine going.?

Many in the U.S. overestimate how much of China's economic success is due to exporting to the U.S., but it is not a negligible factor either.? The E.U. recently surpassed the U.S. as China's biggest trading partner, but that is cold comfort given that Europe is slowing as fast or faster than the U.S.

China has responded with a massive $586 billion stimulus package, aiming to jump-start the economy through investments in housing, infrastructure (especially rails) and health care.? Relative to the size of their economy, that is equivalent to a $2.25 Trillion stimulus package in the U.S (16% of GDP).?

Now, if you add up all the special Fed lending facilities, the TARP, Fannie Mae (FNM)/Freddie Mac (FRE)/AIG (AIG) bailouts, plus our stimulus checks this summer etc., you also get to about $2.25 Trillion.? I wonder which country will have more to show for it after all is said and done.

From a U.S. perspective, this has both good and bad effects.? The Chinese stimulus should also stimulate the rest of the world and it would be nice to have a few trading partners who are not broke.? We might even manage to sell the Chinese things like pollution control equipment as part of their stimulus package.?

The bad side is, however, likely to be more significant.? The U.S. is desperately dependent on China to buy our T-notes. If they are spending that sort of money to stimulate their economy, they are not likely to have much left over to continue to buy U.S. paper. The other major buyer of T-notes in recent years have been the oil states of the Persian Gulf, but with oil prices down sharply, the demand from that source is likely to fall just as sharply.?

With the U.S.