the visible hand

it is the theory which decides what can be observed – einstein

China threatens to trigger US dollar crash

Posted by ecoshift on August 8, 2007

China threatens to trigger US dollar crash – Telegraph
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.

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.
advertisement

“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.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: