It is Time for
China to Use its 'Financial Weapon' on America
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 undermines China's sovereignty, and
must be countered regardless of the financial losses to both the U.S. and
China.
Vice President Biden meets China's paramount leader, Hu Jintau: Whatever the smiles on camera, Biden is likely getting a tongue-lashing from America's largest foreign creditor.
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.
On August 1, the U.S. House
of Representatives finally passed the debt ceiling bill. On the next day, 181 House
members signed a letter to President Barack Obama asserting that the federal
government should quickly approve a sale of F-16 C/D fighter jets to Taiwan to
help ensure "peace and stability across the Taiwan Strait."
On August 2, the U.S. Senate also
passed the debt ceiling bill, and Obama signed it into law. Shortly thereafter,
the U.S. Treasury obtained authorization to issue $400 billion in new debt. Should
China again be the largest buyer of U.S. debt?
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by WORLDMEETS.US
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.
If China stops or reduces its
purchases U.S. Treasuries on a large scale, they will lose value, as will the U.S.
Treasury holdings already in China's possession. But as the situation has
gotten out of hand, allowing politicians in Washington to continue their game may
lead to even worse losses.
American arms sales to Taiwan
may create jobs for the United States, but they will do little to improve the capacity
of Taiwan's military to compete with the Mainland's. The essence of the problem
is that some U.S. lawmakers have a contemptuous attitude toward China's core
interests, demonstrating that they'll never respect China. If China fails to strike
at such people until they feel the pain, Sino-U.S. relations will always be
constrained, continuing their roller-coaster quality.
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.
Because this is money earned
through hard work by the people, China is unwilling to arbitrarily use its
holdings of U.S. Treasuries as a weapon. But when confronting threats to
China's sovereignty, it has no choice but to defend itself.
