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Posted by on Aug 25, 2011 in Business, Economy, International, Law, Media, Places, Politics, Science & Technology | 3 comments

It is Time for China to Use its ‘Financial Weapon’ on America (China Daily, People’s Republic of China)

Should China use its massive holdings of American debt to interfere in U.S. domestic politics? According to this column by Senior Editor Ding Gang of the state-controlled People’s Daily, American arms sales to democratic Taiwan undermine China’s sovereignty, and must be countered regardless of the financial losses to both the U.S. and China.

For the China Daily, People’s Daily Senior Editor Ding Gang writes in part:

If the United States moves forward with its plan to sell weapons to Taiwan, the time will have come for China to use its “financial weapon” against America and teach it a lesson. China has never wanted to use its holdings of U.S. debt as a weapon. But the United States is forcing it to do so.

Despite knowing that creditor countries, particularly China, would be the largest buyers of its new debt, certain arrogant and disrespectful U.S. Congressmen and women have completely ignored China’s core interests, pressuring President Obama to sell advanced jets and even a package of weapons upgrades to Taiwan.

Halting or cutting back massively on purchases of U.S. Treasury bonds will to a certain degree inflict losses on China. So China must endeavor to cut its losses and turn a situation of passivity into one of action. China should ponder ways to directly link U.S. Treasury bond purchase to American domestic politics, while adopting measures to gradually adjust the structure of its foreign exchange reserves.

For example, China could link the amount of U.S. Treasury holdings to U.S. arms sales to Taiwan. Furthermore, it could require international credit rating agencies to further downgrade U.S. Treasuries to force the U.S. to raise interest rates. China could also impose limited trade sanctions on states of U.S. Congress members who vigorously advocate arms sales to Taiwan, which would negatively impact employment in their states.

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  • Daniel Baker

    Ding Gang thinks the way the Confederate diplomats to the UK did in the Civil War. The South thought that by embargoing cotton to Britain, which would cause major damage to Britain’s economy, it could force Britain to recognize the Confederacy. Of course, Britain well knew it could not afford to be seen as bowing to naked coercion, and became more determined than ever to withhold recognition. The USA would react in precisely the same way to Ding Gang’s threat. And Hu Jintao is probably smart enough to know that. This editorial is probably not even aimed at US readers; it’s just one of the Chinese regime’s usual efforts to keep their own people’s resentment directed at foreign targets instead of at the Zhongnanhai.

  • So this is a state-controlled paper. My take on a state-controlled paper is it is not only a mechanism to spread propaganda amongst your own people, but a mechanism to spread subtext to foreign governments.

    The Red State is sending us a slightly veiled message here, we would be stupid to brush it off.

  • Daniel Baker

    Is China actually concerned enough about Taiwan’s weapons that it would risk dragging its economy into recession after the Western world’s just to marginally reduce America’s capability to arm Taiwan? I say no. First, because even in the extremely unlikely event that America knuckled under to Chinese coercion, Taiwan is rich and can always get its weapons elsewhere; the French or Russians would be accomodating. Second, China is still convinced (wrongly, I think) that Taiwan will rejoin the mainland peacefully like Hong Kong did. If China really thought it was going to have to fight a war to get Taiwan back, China would have invaded in 2003, while most of America’s carrier air power was tied up in the Persian Gulf.

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