China Holding U.S. Bond as Weapon
After 6.4 billion U.S. dollars of U.S. arms sale to Taiwan in January, some members of the Chinese armed forces have defended the use of China’s considerable holdings of U.S. Treasuries as a weapon to retaliate against the United States. In a recent article in Chinese magazine Outlook Weekly, senior army officers at the military college of China called a severe response to the sale of weapons, stating that “the penalty that [the U.S.], using economic means, such as dumping some U.S. government bonds.This anger is not surprising: Many Chinese consider arms sales to Taiwan as U.S. interference in the internal affairs of their country. Xiong Lei, China Daily written, suggested that the sale was comparable to a nosy neighbor involved in a family dispute, and asked: “How [the U.S.] react if China sells weapons to Alaska or Hawaii?On this side of the Pacific, the view is very different. While the U.S. officially recognized the People’s Republic of China in 1979, adopted the Taiwan Relations Act in the same year. The act of legal formalization of the US-Taiwan relationship, ensuring that the U.S. continue to supply arms to the island country. Noting the 2001 sale of four decommissioned Kidd-class destroyers Isaac, a military analyst and author Norman Polmar said that “we have always given Taiwan earlier generation of technology.”The existence of political differencesDespite the U.S. economic relationship with China close, the two countries have major political differences, an issue highlighted by the recent struggle on Google get censored in China. Moreover, Taiwan has held democratic elections since the mid 1990s, follows much closer to American political ideals. Freedom House, a nongovernmental organization based in Washington, DC, are the island countries as one of the most democratic countries in Asia.Even apart from Taiwan, China and the U.S. have a strained relationship. The military incident between the last two occurred in 2001 when a Chinese fighter brushing USA an EP-3E Aries II spy plane, disabling the ship before it crashed into the ocean. China allowed the American flight crew to land, and then kept for 10 days, regular interrogation and sleep deprivation. After President George W. Bush apologized, China released the crew of the plane but stayed for three months, during which the ship dismantling.Increasingly aggressive posture of China could owe much to the growing strength of his army, whose budget has been in double-digit annual growth over the past two decades. In 2009, its budget increased by 14.9%, and experts estimate it will have a similar growth in 2010. The Outlook Weekly article quoted General Zhu Chenghu as indicating that the expected increase in 2010 should be meddling “the U.S. has” in Taiwan. Major General Luo Yuan stressed that China should indicate that “because of the threat in the sea off Taiwan, we are increasing military spending.The increase in complaints about U. S. DebtAlthough the U.S. relationship with Taiwan could have a significant impact on China’s military budget, it is likely that China will use the 2010 increase to increase employment and industrial production, not unlike much of the excess current infrastructure in the country. A more worrying is the increasing noise about the U.S. debt. With 755 billion U.S. dollars in Treasuries, China has the power to severely disrupt the U.S. economy.However, the close relationship between U.S. and Chinese economy means that this measure would also have a devastating impact on China. A flooded market would cause the value of China’s remaining shares to plummet, in addition to killing the U.S. market for Chinese goods. It could also result in the freezing of other holdings in China in the U.S., and could even lead to a more direct conflict between the two countries. According to Polmar, “It’s hard to imagine any scenario in which China dump our bonds.”Polmar suggested that Luo, Ke and Zhu’s statements could be back-door saber rattling intended to unnerve the U.S., while appeasing China’s military. For Zhu, this makes sense: In 2005, he suggested that if the U.S. intervened in a Taiwan conflict, China could destroy “hundreds of U.S. cities” with nuclear weapons. The fact that 2005 made statements at a conference sponsored by the Ministry of Foreign Affairs, together with the fact that their most recent reviews were published in a government journal, suggests that Beijing tacitly approved of his remarks, but not likely approve further.