The Chinese government requires that your passport must be valid for at least six months beyond the expiry date of your visa.
You'll need at least one-entire blank page in your passport for the visa. Your country's embassy or consulate can usually add additional pages to your passport if need be.
Losing your passport is very bad news indeed. Getting a new one takes time and money. However, if you will be staying in China or any foreign country - for a long time, it helps tremendously to register your passport with your embassy. This will eliminate the need to send telexes back to your home country to confirm that you really exist.
If you lose your passport, you should certainly have some ID card with your photo many embassies require this before issuing a new passport. Some embassies will accept a driver's license, but others will not - an expired passport will often save the day.