China threatens 'nuclear option' of dollar sales

Schmed

I'm a corpse without a soul...
Nov 4, 2002
2,356
0
0
Shitsville, NY
#1
China threatens 'nuclear option' of dollar sales


By Ambrose Evans-Pritchard

Last Updated: 1:41am BST 09/08/2007





The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Fistful of dollars - China's trade surplus reached $26.9bn in June


Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.
"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.
The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".
She said foreign control over 44pc of the US national debt had left America acutely vulnerable.
Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.
"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.
A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.
The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.
Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".
Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.
 

UCFGavin

Registered User
Feb 25, 2006
2,061
0
0
#2
this is actually good for the common american. it will help people wake up and realize that we aren't invincible and we need to watch the fuck out.
 

abudabit

New Wackbag
Oct 10, 2004
14,802
0
0
#3
I might be moving to China soon, it'd be cool to move to Shanghai.
 

MJMANDALAY

Registered User
Jan 26, 2005
13,145
1
0
#4
Lets give Monopoly money to everyone, thata will learn em.
 

abudabit

New Wackbag
Oct 10, 2004
14,802
0
0
#6
They hate them. Turn on the tv in any city in China at any time and odds are there is at least one movie playing about the Japanese occupation of China.

Tokyo is expensive to live in, probably one of the 5 most expensive cities to live in in the world. Although it's huge (30 million people) so probably on the fringes it's easier.
 

WhiskeyWhispers

I Want To Kill You All
Mar 11, 2007
3,544
3
0
Jersey
#8
They hate them. Turn on the tv in any city in China at any time and odds are there is at least one movie playing about the Japanese occupation of China.

Tokyo is expensive to live in, probably one of the 5 most expensive cities to live in in the world. Although it's huge (30 million people) so probably on the fringes it's easier.
Dammit!

I was hoping they liked them, so I could move there and get a nice subservient Anime-eyed Jap girl that just giggled and sucked and designed kick ass video games for me to play all day.

Oh well, Commie it is.
 

MrAbovePar

En Taro Anthony
Mar 14, 2005
13,779
3,173
678
Covington. La
#10
Are the Chinese stupid enough to sink their own economy as well?

The dollar crashes...we'll get a recession. China will get a full blown depression though as Americans stop buying their stuff and they start buying our "cheap" exports.
 

Schmed

I'm a corpse without a soul...
Nov 4, 2002
2,356
0
0
Shitsville, NY
#11
They hate them. Turn on the tv in any city in China at any time and odds are there is at least one movie playing about the Japanese occupation of China.

Tokyo is expensive to live in, probably one of the 5 most expensive cities to live in in the world. Although it's huge (30 million people) so probably on the fringes it's easier.
The Chinese will never, ever forget "The **** of Nanking" and the mountain of breasts hacked off of Chinese women during this incident.