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There is a coal panic in China, and Beijing has dispatched a SWAT team of energy traders to corner the market on abundant, clean-burning uranium.

China’s problem is two-fold: a lack of coal and severe coal pollution.

In case you haven’t seen the CNN.com story of May 20th, Chinese power plants are running out of coal, with less than a three-day supply in some areas, according to official government statements. About 32 power plants shut down due to a scarcity of fuel — aggravated by the May 12th earthquake.

The current decline in uranium prices gives these China super-traders a critical inflection point to pick up the slack and clean up the environment.

China is the world’s biggest emitter of sulfur dioxide, a toxic byproduct of burning cheap, dirty coal. The country’s all-powerful State Council reported that pollution cost more than $200 billion in 2005, nearly 10% of the national GDP — the last year Beijing released the numbers of the nation’s environmental damage.

The pollution is also sparking little-known riots.

On April 8, 2006, villagers armed with iron bars attacked factories polluting their water. Pollution riots in Huashui in April 2005 pitted outraged citizens against 10,000 police officers. And in mid-July 2005, some 15,000 protestors amassed in at the gates of an offending factory, throwing stones and overturning police cars, despite the thick clouds of tear gas.

The Chinese people are taking to the streets. They want to stop the pollution that is damaging their livelihoods and health.

A look at one industry will show you the devastating financial impact of China’s addiction to dirty coal.

Nearly 12-million tons of grain are contaminated every year from the airborne mercury contamination of coal. (As though China’s agriculture and food industries don’t have enough problems from the recent recalls.)

China could benefit greatly from plunging uranium prices…as well as investors who take a long-term position in China’s growth.

Uranium futures contracts through the end of this year are trading in the mid $60 range. By comparison, U308 uranium was priced at about $140 per pound as early as January of this year.

The steep decline in uranium could be just what the Chinese need to make their move before manufacturers start moving out entirely to countries such as Vietnam.

This exodus of capital is certainly in the tea leaves…

– China’s power shortage forced Shanghai Volkswagen to stop work for several days at a time.

– Sony’s Chinese manufacturing plant had to cut production due to chronic power shortages.

– Chengdu City suffered the worst power shortage ever, with 345 companies stopping production.

– The China unit of Marubeni Corp, Japan’s fifth-largest trading company, stopped work two to three times a week due to blackouts.

– General Motors and Panasonic shifted production to off-peak hours, losing days of work.

There is a growing sense of urgency to corner the uranium market.

This stealth team of Chinese traders is armed with a $300-billion war chest to grab up every last ounce of U308 uranium. And if anyone can pull this off, it’s the Chinese.

Unlike gold, oil or copper, there’s no regulated trading exchange for U308. You can’t buy an ETF for it. U308 moves in a near-underground economy of secretive auctions where uranium trading is fast and furious.

The absence of a regulated trading exchange gives an enormous advantage to a stealth team of Chinese traders instructed by the government to track down every last pound of U308.

This crackerjack team is headed by a cabinet-level rising star who is chauffeured around Beijing in a big, black Audi. He sports a cigarette holder like FDR and is considered one of China’s top economists.

Under his brilliant supervision, the Chinese uranium traders will draw on a war chest of $300 billion in U.S dollars. That amount is nearly twice the size of the world’s largest mutual fund. It’s about six times bigger than the legendary Magellan Fund. And it’s bigger than the world’s top four mutual funds combined.

Over the next 15 years, China plans on building 30 new nuclear reactors. Without those critical reactors, the country’s environment and economy could be heading straight for the dumpster.

China desperately needs another 23,000 megawatts to maintain its nonstop growth.

And 23,000 megawatts is a massive amount of electricity. It’s how much New York City lost during the great blackout of 2003, when 19 million New Yorkers were plunged into darkness and the city was dead in the water.

That’s why China is committed to shelling out $50 billion on 30 nuclear power plants. The country must make the leap from 8.7 million kilowatts today to 40 million kilowatts by 2020. It’s the most ambitious nuclear power expansion in history.

For investors interested in China, the move to nuclear energy is great news. It means that China will overcome its energy problems — removing another obstacle to long-term growth.

–Irwin Greenstein