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  1. #1
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    China to USA: You will lose a trade war...

    Ding Yifan, a policy guru at the Development Research Centre, said China could respond by selling holdings of US debt, estimated at over $1.5 trillion (963bn). This would trigger a rise in US interest rates. His comments at a forum in Beijing follow a string of remarks by Chinese officials questioning US credit-worthiness and the reliability of the dollar.

    China's authorities seem split over how to respond to moves on Capitol Hill for legislation to punish Beijing for holding down the yuan. The central bank has ruled out use of its "nuclear weapon", insisting that it would not exploit its $2.45 trillion of foreign reserves for political purposes. "The US Treasury market is a very important market for China," it said.

    However, the mood is hardening on both sides of the Pacific. The dispute risks escalating if China's trade surplus with the US climbs further and more US jobs are lost. US Treasury Secretary Tim Geithner, who has taken a softly-softly line in the past, said on Friday that China had done "very little" to correct the undervaluation of the yuan since ending the dollar peg in June.

    Mr Ding reflects thinking among some in the Poltiburo, who seem convinced that the US is in decline and that China's rise as an exporter of goods and capital give it the upper hand.

    "They are utterly wrong," said Gabriel Stein from Lombard Street Research. "The lesson of the 1930s is that surplus countries with structurally weak domestic demand come off worst in a trade war."

    He described the implicit threat to sell Treasuries as "empty bluster" because Beijing's purchase of these bonds is a side-effect of its yuan policy. "Bring it on: it will weaken the dollar, which is what the US wants. The interest rate effect can be countered by the Fed."

    "Some Chinese officials seem to believe that buying Treasuries underpins US public spending. In fact China's mercantilist policy is forcing the US to run large deficits against its own interest. China should be terrified of a trade war."
    http://www.telegraph.co.uk/finance/c...trade-war.html

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  2. #2
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    I don't see why the US would want to get into a trade war with China considering the state of our economy. A trade war will hurt our recovery and possibly make us take a step back.
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  3. #3
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    Quote Originally Posted by FOBolous View Post
    I don't see why the US would want to get into a trade war with China considering the state of our economy. A trade war will hurt our recovery and possibly make us take a step back.
    Did you read the article?

    It'd hurt China more, and possibly would push for fair trade practices from them.

  4. #4
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    Quote Originally Posted by behindmydesk View Post
    Did you read the article?

    It'd hurt China more, and possibly would push for fair trade practices from them.
    It would definitely cripple China's manufacturing sector. But then again it would lead to massive inflation of goods here in the States leading to a Fed policy of increased interest rates which in turn would hurt our GDP as well.

    It's a bad idea all around. China definitely needs to seriously get off their peg and not play the "look what we did that one day" game any more. Otherwise someone will take that step that leads to both economies hurting.
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