Will China use a financial weapon against the U.S. over Taiwan?
Writing in the state-owned People's Daily, Ding Gang argues that China should use its "financial weapon to teach the United States a lesson" on Taiwan arm sales:
US arms sales to Taiwan can only create more jobs for the United States but cannot improve the ability of Taiwan's military force to compete with the Chinese mainland. The essence of the problem is that some US Congress members hold a contemptuous attitude toward the core interests of China, which shows that they will never respect China. China-US relations will always be constrained by these people and will continue along a roller coaster pattern if China does not beat them until they feel the pain.Stopping or massively reducing US Treasury bond purchases will certainly bring losses to China to a certain degree. China must try to reduce the loss and transfer the passive situation to an active one. China should consider how to build a direct link between the US Treasury bond purchase and US domestic politics while adopting measures to gradually adjust the structure of China's foreign exchange reserves.
For example, China can directly link the amount of US treasury holdings with US arms sales to Taiwan and require international credit rating agencies to demote US treasuries to force the United States to raise interest rates. China can also launch limited trade sanctions to the states of those US Congress members who vigorously advocated arms sales to Taiwan to affect their employment.
If (a big if) China is going to stop buying U.S. Treasuries, it will probably have less to do with Taiwan and much more to do with the soundness of the "full faith and credit" of the issuer.
(AP Photo)
