- Registration time
- Last login
- Online time
- 184 Hour
- Reading permission
I think you are being somewhat melodramatic. US politicians are playing the China trade card, because they are pandering for votes in the next election. While it is possible for US politicians to impose a punitive tariff on Chinese exports, China can do likewise with US exports to China. That’s a no win situation for both.
I agree it is unrealistic for China to sell all the US Treasuries, since that would cause a cascade collapse of the US. However, what is more realistic is (and this is something Central Bankers around the world have done so it is with precedent) China can just slow down new purchases of US Treasuries, and rebalance away from the dollar into other stronger currencies. This will weaken the dollar, which may or may not help US exports (notice the dollar has already been trending down, yet it hasn’t really help USA’s exports since the currency premium isn’t large enough to effectively offset China’s cheaper labor cost. Since USA continues to need new financing because it continues to run annual budget deficits, new financing come with higher interest to its creditors – namely China, Japan, etc.
Hopefully, Wu Yi and Paulson will not succumb to pressure from the political panderers, and do what is right for both countries. USA needs to work with China as an allied, open trade for higher tech products and sell China the things it wants to buy. By not treating China as an allied, USA only further isolates itself at a time when it needs more friends in this world, especially after the Bush hegemonic and unilateral adventures in the Middle East, resulting in greater world animosity towards USA.
[ Last edited by raymondusa at 2007-5-21 10:24 PM ]