China threatening to drop its US Bond Holdings.

[a_Username]

http://www.dailyfinance.com/story/wi...%2F19373579%2F

Following the $6.4 billion U.S. arms sale to Taiwan in January, some members of the Chinese military have advocated using China's considerable U.S. Treasury bond holdings as a weapon to retaliate against America. In a recent article in Chinese magazine Outlook Weekly, senior army officers at China's military university called for a stern response to the arms sale, stating that "we could sanction [the U.S.] using economic means, such as dumping some U.S. government bonds."

This anger isn't surprising: Many Chinese perceive the Taiwan weapon sales as American interference in their country's internal affairs. Xiong Lei, writing in China Daily, suggested that the sale was comparable to a nosy neighbor getting involved in a family quarrel, and asked "How would [the U.S.] react if China would sell weapons to Alaska or Hawaii?"

On this side of the Pacific, the view is considerably different. While the U.S. officially recognized the People's Republic of China in 1979, it passed the Taiwan Relations Act in the same year. The act legally formalized the U.S.-Taiwan relationship, guaranteeing that the U.S. would continue to supply weapons to the island country. Noting the 2001 sale of four decommissioned Isaac Kidd-class destroyers, military analyst and author Norman Polmar notes that "we've always given Taiwan earlier-generation tech."

Significant Political Differences

Despite America's close economic relationship with China, the two countries have significant political differences, an issue that was highlighted by the recent fight over Google getting censored in China. On the other hand, Taiwan, which has held democratic elections since the mid-1990s, hews far closer to American political ideals. Freedom House, a nongovernmental organization based in Washington, D.C., lists the island country as one of the most democratic countries in Asia.

Even apart from Taiwan, China and the U.S. have a strained relationship. The last military incident between the two occurred in 2001, when a Chinese fighter jet brushed a U.S. EP-3E Aries II spy plane, disabling the craft before crashing into the ocean. China allowed the American flight crew to land, then held them for 10 days, regularly interrogating them and depriving them of sleep. After President George W. Bush apologized, China released the crew members but held the plane for three months, during which it disassembled the craft.

China's increasingly aggressive posture may owe much to the growing strength of its military, whose budget has had double-digit year-over-year growth for the past two decades. In 2009, its budget increased by 14.9%, and experts estimate that it will have comparable growth in 2010. The Outlook Weekly article quoted Major General Zhu Chenghu as stating that the anticipated 2010 increase should take into account America's "meddling" in Taiwan. Major General Luo Yuan emphasized that China should state that "due to the threat in the Taiwan Sea, we are increasing military spending."

Increased Grumbling About U.S. Debt

While America's relationship with Taiwan could have a significant impact on China's military budget, it seems more likely that China will use the 2010 increase to increase employment and industrial output, not unlike much of the country's current infrastructure binge. A more worrisome development is the increased rumbling about America's debt. With $755 billion in Treasury bonds, China has the power to severely disrupt America's economy.

But the close relationship between the American and Chinese economy means that this move would also have a devastating impact on China. A flooded market would cause the value of China's remaining holdings to plummet, in addition to killing the American market for Chinese products. It could also result in a freeze on China's other holdings in the U.S., and could even lead to a more direct conflict between the two countries. According to Polmar, "It's hard to think of any scenario under which China would dump our bonds."

Polmar suggests that Luo's, Ke's and Zhu's statements might be back-door saber-rattling, intended to unnerve the U.S., while appeasing China's military. In Zhu's case, this makes sense: In 2005, he suggested that, if the U.S. intervened in a Taiwan dispute, China could destroy "hundreds of American cities" with nuclear weapons. The fact that his 2005 statements were made at a lecture sponsored by the Foreign Ministry, coupled with the fact that his most recent comments were published in a state-run magazine, suggests that Beijing tacitly approves of his comments, but is not likely to endorse them further.

Scary Situation.

[Xmicro_SS]

Great, Tank our economy so that nobody is left to buy their crap!!

They are locked in like it or not. The only way that relationship will end will be badly! WWIV

[DGthe3]

China needs the US to be reasonably healthy. Plunge the US into a depression and they won't be interested in anything that has the sticker "Made in China" on it. Its a lot easier for the US to find some other creditor than it is for China to find another place to sell their cheap, low quality products. If they don't know this they are being incredibly stupid. Speaking of which ...

China could destroy "hundreds of American cities" with nuclear weapons

So what? The US can eliminate all the Chinese nuclear missiles practically simultaneously, including the missile submarine, with 0 warning. B2 bombers can ruin your whole day. And even if China managed to get the first shot off, they'd be obliterated half an hour later. By the way, while China has hundreds of nuclear weapons, it doesn't have hundreds of ICBM's of sufficient range to launch them with. And thats assuming it all works properly for them anyways. Their nuclear technology comprised mostly of Chinese knockoff's of Soviet designs, which were largely stolen US designs. Odds are half of them would blow up as they're launched and the other half will be duds.

[PQ]

What would Wal-Mart do?

[Mindz]

What would Brian Boitano do?

[RobertHarriSS]

[THUMPER20X]

I hate China.

[Hicompression]

Originally Posted by THUMPER20X

I hate China.

Ever been there? Ever lived with the common people? I have and I have much respect for them. It's the Chinese government, not the people you should be hating on.

[Ghost of Vincent Price]

Originally Posted by Xmicro_SS

Great, Tank our economy so that nobody is left to buy their crap!!

They are locked in like it or not. The only way that relationship will end will be badly! WWIV

When the hell did WWIII happen? Was it some WWE event or something?

[Hicompression]

Originally Posted by Ghost of Vincent Price

When the hell did WWIII happen? Was it some WWE event or something?

LOL!

[SS 376]

Originally Posted by DGthe3

China needs the US to be reasonably healthy. Plunge the US into a depression and they won't be interested in anything that has the sticker "Made in China" on it. Its a lot easier for the US to find some other creditor than it is for China to find another place to sell their cheap, low quality products. If they don't know this they are being incredibly stupid.

Both countries need each other. If the US isn't buying Chinese crap, their unemployment shoots up, which is going to destabilize their government. I mean, 10% unemployment there is a hundred million people out of work.

[coolman]

There's always an Arquillian Battle Cruiser, or a Corillian Death Ray, or an intergalactic plague that is about to wipe out all life on this miserable little planet

So live life and don't worry about what you can't control.

[blackknight]

"In China, they hardly ever go to Church. " -Forest Gump

Explains a lot.

[brandotron]

Originally Posted by coolman

There's always an Arquillian Battle Cruiser, or a Corillian Death Ray, or an intergalactic plague that is about to wipe out all life on this miserable little planet

So live life and don't worry about what you can't control.

Good Quote.