Google, and many non-Chinese Google users, are still angry at China for an Internet based spying campaign waged by the Chinese government. Actually, many Chinese Google users are upset with this as well, but cannot go public for fear of retribution. Meanwhile, most Chinese scientists rely on Google for keeping up on research in their fields. No other search engine provides the capabilities Google has in this area. Actually, there are a lot of unique search features Google provides, that would take years, if ever (because of patents), for Chinese based search firms to duplicate. So China has not made a lot of noise about shutting Google out of China, while Google continues to loudly condemn Chinese hacking of Google. At the moment, Google is preparing to shut down their China operations, unless the Chinese government makes nice (like halting most, or all, of the censorship they impose on Chinese users of Google search.) The government thought Google would never risk losing the largest market on the planet. Now they are not so sure, and the cries of protest from Chinese Google users are getting louder, and more ominous.
The government has let North Korea know that China has lost patience, and that it's time for the North Korean leadership to take Chinese advice, or else. China has put together a $10 billion pool of private investment money for North Korea, but Chinese auditors and advisors will accompany the money. If the increasingly corrupt North Korean officials try to steal the Chinese money anyway, China will cut off all aid (China is the only remaining source of food and fuel for North Korea), and possibly seal the border as well (halting the growing trade, much of it illegal, between the two countries). China also demands an end to the Kim dynasty (but not the removal of Kim Jong Il from power, at least not yet). If North Korea is willing to reform its economy, along Chinese lines, China will continue to help. If not, the implied threat is of a Chinese takeover, one way or another.
Corruption in the provinces has Chinese financial experts fearing a banking crises. That's because auditors (at least the ones not intimidated or driven away by local officials) report that some areas have huge numbers of bad loans (the result of local corruption), and this makes local banks technically insolvent. To limit the impact of a bank crises, the government has instituted national controls on bank credit. Existing loans are now subject to ongoing scrutiny, and that new policy will be used to try and deal with the corrupt loans (which in some cases are outright theft, but are usually just made for enterprises that are unlikely to succeed.) Corrupt local officials will resist losing access to local banks, but at least the government has recognized that there is a big problem here, one that could cripple the economy if the entire banking system froze up because of all the bad loans.
February 26, 2010: After a decade of effort, the Chinese government approved a National Mobilization law. This specifies how the nation will be mobilized for a national emergency. Among other things, all military age males are liable for conscription and all businesses, including foreign owned ones, are compelled to provide the government with whatever is requested. The government can invoke the new law for any reason, including internal unrest. With this law as a guideline, the Chinese government can now plan details of how to use it to defend the motherland, and the Communist Party (that rules China by right of conquest, and is determined to stay in power any way it can. This new law helps).
February 22, 2010: The government has cancelled some high level meetings between U.S. and Chinese military officials, as a way to protest the American decision to sell Taiwan $6.4 billion worth of weapons. This isn't much of a "punishment," although some Chinese officials were also allowed to mouth off in the media, demanding harsher responses. But none of these are really scary, because the United States can come right back with something worse (be it economic or military.) This indicates that this is all for internal consumption, to show the Chinese people that, while the communists are a bunch of corrupt dictators, they can still go to bat for Chinese dignity, and sock it to foreigners. This goes over big in China, because your average Chinese is acutely aware that China has been weak, and often humiliated, during the past two centuries.
February 21, 2010: The U.S. Department of Defense released a report that detailed the sorry state of Taiwan's air force. While possessing 400 warplanes, the Chinese efforts to block the purchase of new aircraft, or upgrades, has led to diminished combat capability. Chinese officials condemned the report as an effort to support more American arms sales to Taiwan. But the report also pointed out that Taiwan had not built defenses against Chinese ballistic missiles, which have been aimed at Taiwan air bases and other military targets for over a decade.
February 18, 2010: Responding to Chinese claims on Indian territory, India announced a five year plan to increase Indian abilities to deal with any Chinese aggression against the northeast Indian state of Arunachal Pradesh (which China claims as a part of Tibet.) The Chinese claims have been on the books for decades, but in the last year, China has become more vocal about it. That's one reason India hiked its defense spending 21 percent last year. But since both nations have nuclear weapons, a major war over Arunachal Pradesh is unlikely. But India fears that China might try to carry out a lightning campaign (a few days, or a week), and then offer peace terms (with China keeping all or part of Arunachal Pradesh). Since neither country would be willing to start a full scale nuclear war over Arunachal Pradesh (a rural area with a population of about a million people, spread among 84,000 square kilometers of mountains and valleys), the "grab and parley" strategy has to be taken seriously.
February 14, 2010: Chinese officials were quick to respond to the recent Indian success in getting their Agni III ballistic missile into active service. Agni III has a range of 3,500 kilometers and was built to reach targets in China. Chinese officials pointed out that India was, with the Agni III, still at least a decade behind China in the long range ballistic missiles department. The Chinese introduced the DF-21 in 1999. Launched from Tibet, the DF-21 (range: 1,800 kilometers) can reach most major targets in India. Around the same time, the DF-31, with a range of 8,000 kilometers also entered limited service. The Chinese officials were also quick to dismiss Indian efforts on anti-missile systems (in cooperation with Israel). The Chinese comments appear to be largely for internal consumption, as the Indian efforts are belittled, and it is strongly implied that the Indian missiles not really ready for prime time.