China Threatens Economic Terrorism
China holds $1.33 trillion in foreign reserves and is threatening to liquidate its US treasuries if Washington follows through on plans to imposes trade sanctions to force a yuan revaluation. Estimates put China’s US bond holdings at over $900bn.
“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 Fan, an official at the Chinese Academy of Social Sciences] told China Daily.
Chinese state media describes this action as China’s “nuclear option”, which is pretty close to the truth. Liquidation of a billion dollars of bonds could possibly crash the dollar, causing a US recession and wreaking havoc on the global economy.
Threatening to execute this plan is blackmail. Actually doing it is nothing less than economic terrorism.
Favored Trade Partner wasn’t enough for them — they manipulate the value of their currency so as to come out on top in trade:
China pegs the yuan to the dollar at a fixed rate and strictly regulates imports and the allocation of foreign exchange. In order to maintain the yuan’s fixed value, China must create a residual supply of yuan to counter growing demand for its currency; China achieves this by buying dollars in foreign exchange markets. Between December 2000 and July 2003, China more than doubled its foreign reserve holdings from $168 billion (16% of its GDP) to $361 billion (31% of its GDP).
Had we confronted China in the 90s we wouldn’t be in this situation. We don’t negotiate with terrorists, and we shouldn’t let this deplorable situation continue. It’s time to stop kowtowing to China. Tell your representatives and senators to grow a pair and impose strict trade sanctions on China.
If we don’t, just think where we’ll be in another ten years.
And predicatbly, after six years of abandoning conservatism for populsim, the right is increasingly picking up populism’s anti-capitalist leanings.
At least with Republicans openly calling for socialism instead of just voting for it while they talk about capitalism, true conservatives will feel less conflicted about pulling the lever for someone else.