China is mad about American arm sales to Taiwan and is willing to stop buying T-Bills to show how angry they are.
The Last I heard China does not have a free press so when China Daily Speaks this is the Chinese government speaking. The Chinese are famous for not telling anyone their Diplomatic plans until they have thought them out and are ready to enact their plans.
The Chinese are mad about impending American Arms sales to Taiwan
#14 Tensions between the United States and China are rising again. A new opinion piece on chinadaily.com is calling for the Chinese government to use its holdings of U.S. debt as a “financial weapon” against the United States if the U.S. follows through with a plan to sell more arms to Taiwan. The U.S. and China are the two biggest economies in the world, so any trouble between them would mean economic trouble for the rest of the globe as well.
The China Daily
is regarded as the English-language “window into China” and is often used as a guide to official policies.
http://en.wikipedia.org/wiki/China_Daily
The Chinese plan to stop American arms sales to Taiwan is described below.
Stopping or massively reducing US Treasury bond purchases will certainly bring losses to China to a certain degree. China must try to reduce the loss and transfer the passive situation to an active one. China should consider how to build a direct link between the US Treasury bond purchase and US domestic politics while adopting measures to gradually adjust the structure of China’s foreign exchange reserves.
For example, China can directly link the amount of US treasury holdings with US arms sales to Taiwan and require international credit rating agencies to demote US treasuries to force the United States to raise interest rates. China can also launch limited trade sanctions to the states of those US Congress members who vigorously advocated arms sales to Taiwan to affect their employment.
http://www.chinadaily.com.cn/opinion/2011-08/08/content_13069554.htm
It seems China has a well thought out plan and they are using their media to warn us before they act. But will we listen? China has tons of cash they can afford to lose money on our T-bills by destroying our economy since it would be cheaper than a war over Taiwan.
China can easily direct its factories to produce goods for their own economy instead of our economy after our economy collapses. All they would have to do is pay their workers more. Paying their workers more would ease Chinese worries about internal unrest thus they kill 2 birds with one stone.
There is a huge downside for America if China stops buying our T-Bills but since losing money on American T-bills is cheaper than a war to get Taiwan and redirecting the Chinese economy toward domestic rather than American demand would help cool down domestic unrest China has plenty of reasons to not buy our T-Bills. Besides emerging world powers love to show off their strength China has resisted doing that before now.
But it would be in character for an emerging world power to humble the previous world power and that moment might be now.
Yes this article is months old but the important thing is China’s leadership is thinking about not buying our T-Bills.
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