China threatens to trigger US dollar crash

[cato2]

China threatens to trigger US dollar crash


By Ambrose Evans-Pritchard
Last Updated: 9:23am BST 08/08/2007

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 Treasury bonds if Washington imposes trade sanctions to force a yuan revaluation.
Blog - Dollar to collapse?



Henry Paulson, the US Treasury secretary, met with Chinese president Hu Jintao in Beijing last week

Two Chinese officials at leading Communist Party bodies have given interviews in recent days warning, for the first time, that Beijing may use its $1,330bn (£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 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 more than $900bn in a mix of US bonds.
Xia Bin, finance chief at China's Development Research Centre (which has cabinet rank), kicked off what 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 said.

He Fan, an official at the Chinese Academy of Social Sciences, went further yesterday, letting it be known that Beijing had the power to set off a dollar collapse, if it chose 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," he told China Daily. "Russia, Switzerland and several other countries have reduced 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."

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 decisions 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, 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 sub-prime 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 Treasury secretary, said any such sanctions would undermine US authority and "could trigger a global cycle of protectionist legislation".

China threatens to trigger US dollar crash - Telegraph

Nixon's revenge?

[ptco911]

We have unfortunately allow ourselves to get into this mess. If our trade laws regarding importing limits were tougher. Our trade deficit with China could very well bring us down economically. The US at one time was the economic and production capital of the world. We are now the importing kings of the world. I am afraid we have lost our ability to be self sufficient. We rely on the labor of others and have been surpassed in many arenas. The only educational field we still have a quantitative lead is lawyers. The United States' citizens are some litigating fools.

China is very powerful economically now and gaining strength daily. This is a very serious threat.

[cato2]

The class of the wealth is growing in this country, and the class of the poor is also growing. It is the middle class that is flat lining and stagnant. While Bush points to an employment picture shows job growth, the jobs being added are of lessor pay. After WWII a person could find a factory job, having only a high school education and still raise a family. Those jobs are being replaced by service industry jobs. The factories that moved south to escape unionism of the north are now leaving this country where manpower is cheaper. Secondary education is more expensive then ever before, closing out that avenue for many. The middle class is the one that is under assault here.

[redtanker]

You know i have to agree.....we did this to ourselves.
I am as guilty as the next person when it comes to buying goods made in China.
but I have tried to stop doing so as of late.
I have often paid more for an item made in the USA or even Italy, England or Mexico to aviod buying something made in China.

I know i am just one person but...... every little bit helps.

[herbstin]

Originally Posted by redtanker

You know i have to agree.....we did this to ourselves.
I am as guilty as the next person when it comes to buying goods made in China.
but I have tried to stop doing so as of late.
I have often paid more for an item made in the USA or even Italy, England or Mexico to aviod buying something made in China.

I know i am just one person but...... every little bit helps.

You're not the only one. I've avoided buying anything made in PRC (mainland China) for many years. I will not buy any tools, hardware or motors from them (they are poorly made and very weak - found that out the hard way years ago. We've forgotten more about metalurgy than they ever learned). I will buy things made in ROC (Taiwan), they're fairly good quality and it annoys the ChiComs. It's getting harder and harder to "Buy American" as we produce less & less.

[redtanker]

boycott made in china : boycott hub : alternative shopping

"We are attempting to locate stores and cooperatives that do not carry Made In China products. We also welcome names of products that are not made in China, and where they are available."


This site is dedicated to "BOYCOTT CHINA"

has list of US made products and web sites that explaine even more

[cato2]

Originally Posted by redtanker

boycott made in china : boycott hub : alternative shopping

"We are attempting to locate stores and cooperatives that do not carry Made In China products. We also welcome names of products that are not made in China, and where they are available."


This site is dedicated to "BOYCOTT CHINA"

has list of US made products and web sites that explaine even more

I see you made a seperate post, good idea. What worries me the most is the food chain. From pets to humans, it seems that the oversight is missing concerning the safety of these products.