It’s official, China-booster Rio Tinto has gone all cold on the boom as it continues to fight off BHP Billiton’s shrinking takeover offer.

All we need now is similar comments from BHP, which has been an even bigger bull on the commodities boom.

Rio’s switch is contained in its third quarter production review, released at 3pm Wednesday to the ASX.

Within 10 minutes of the release Rio Shares were down 5%, or over $4, at $78.67 and BHP shares were off nearly 4%, or $1.20 at $29.80.

Rio CEO Tom Albanese said in his commentary accompany the production report that China was “pausing for breath” and for a big commodity producer like Rio, that means lower demand and prices in 2009 for its range of products (and for the likes of BHP as well, which has also to contend with falling oil and gas prices).

Prices for metals like copper are already down and not even the sharp fall in the value of the Aussie dollar can soften the blow. Oil is falling but iron ore and coking coal is still being sold into China, Japan, Korea and other markets at this year’s record levels. That will change from April 1, 2009.

Mr Albanese said there won’t be a recovery in China until next year as a result.

That means record contracted iron ore and coking and thermal coal prices will fall sharply in the new contract talks due to start next month. BHP and Rio could possibly lose the price premium they screwed out of the Chinese mills in the price talks this year.

And, despite all the doubters, we will need every dollar from the Federal Government’s package to keep this economy out of a noticeable slowdown next year, even a recession. It could come in the middle six months of the year.

“In the near term, the Chinese economy is pausing for breath. China is not completely insulated from an OECD recession and we will see an impact on Chinese exports. However, the near term slowdown of growth is substantially due to tightening of monetary policy introduced by the Chinese government last year in order to tackle inflation,” mr Albanese told shareholders in the statement..

“Furthermore, we expect third quarter economic data to show an exaggerated slowdown, reflecting the postponement of projects during the Olympics. Looking further out, Chinese GDP will remain largely driven by the domestic economy and we expect industrialisation and urbanisation to continue apace with strengthening demand across a range of Rio Tinto products.”

“Over time, as economy-wide inventories are dissipated, industrial production and commodity demand can be expected to accelerate. Nevertheless, it now seems clear that any bounce in net demand will be delayed until next year.

The long-foreshadowed deceleration in economic activity has resulted in a marked reduction in Chinese commodity demand growth from the overheated levels we saw in 2007. But we should expect that investment, construction and therefore commodity demand in a fast growing developing economy like China’s will have a cyclical pattern around a strong underlying trend.

“While apparent demand for steel making raw materials, copper and aluminium has slowed, lower prices mean that Chinese producers are facing margin pressure and should be expected to cut their production. For example, it is likely that the vast majority of Chinese aluminium producers are now making operating losses.”

His comments come after China released figures on Monday night showing that the trade surplus hit its highest level ever in September.

China’s trade surplus hit a record $US29.3 billion last month as exporters defied all the forecasts of falling international demand.

Exports rose 21.5% year-on-year last month compared with 21.1% in August.

In dollar terms, exports in September totalled $US136.4 billion, while imports grew 21.3% to $US107.1 billion, even though the price of oil and many metals has fallen with the slump in global commodity prices.

The rise in exports was despite a 13% fall in the amount steel exported in September.

China is the world’s biggest steel producer, but shipments fell to a three month low last month of 6.7 million tonnes. from a record 7.68 million in August.

That’s still 50 percent higher than a year earlier, according to official figures.

And to end this gloom, here’s an interesting factoid from the yesterday’s Financial Times:

According to China Customs, toy exporters declined in number by 52.7% to 3,507 factories in the first seven months of the year, compared with the same period in 2007, providing backing for persistent anecdotal reports that cost pressures have forced large numbers of toy factories to close .