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 Telegraph.co.uk:
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.
Veiled? 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.”