The Incontiguous Brick

August 11, 2007

China’s use of extortion diplomacy

Filed under: China,Money,Warnings — iknowkeith @ 8:51 am

On August 9, 2007 an very significant event in international relations past us by with very little mention in American media. On this day, while we were reading about trapped miners and broken bridges, Beijing threatened to crush the world’s economy if it didn’t get what it wanted.

From the

    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.

ccp-flags.jpgVeiled? Not really. The Chinese state media described the threat as China’s “nuclear option.” At a time when the market is already in turmoil, an attack like this could be devastating to the US economy.

The greater risk of this is not about the trade negotiations and devaluated currency. If the US does not back down and ultimately forces Beijing hand, there could be a disastrous economic crisis and worldwide recession. However, if Washington backs down it sends a signal to Beijing that US policy can be bought (or coerced, I guess policy has always been up for sale). The problem of China’s stockpiled reserves remains and continues to grow larger each year we import more than we sell. Now that China is building the military muscle to not be pushed around, it is ready to do some pushing. What better way to start pushing than with a little financial extortion?

So much for China’s “peaceful rise.”

Now we know one more way that Beijing will use to dissuade US involvement in the retaking of Taiwan. It may come down to a question of what we value more: our friends of our economy.




    Comment by Jana — August 12, 2007 @ 4:42 am | Reply

  2. Creepy. I was just talking with a co-worker on Friday about how the world pretty much has its hands on the US’ balls. The government has overspent so much, and we are in such a trade deficit, that too many countries own a piece (some a really large one) of us now. They expect Americans to manage their money better, but our own government can’t even be a decent role model. The Iraq war is a prime example. Instead of saving money and shoring up places at home, they go over there and stir up a hornet’s nest that’s taking billions upon billions to finance. What has it accomplished? Nothing good from my point of view. The Arab countries hate us even more now. I could understand Afghanistan, but Iraq is a black hole money pit. China has us pwned now.

    Comment by abbydonkrafts — August 12, 2007 @ 10:08 pm | Reply

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