DailyFX.com - This morning, the UK Telegraph published an article titled “China Threatens ‘nuclear option’ of dollar sales. This has received more than the usual press because shifts in Chinese Policy are typically announced through government sponsored think tanks or academics. This time however, the warning was given by two government officials which is a reflection of how serious this threat is. With $1.3 trillion in foreign reserves, most of which are held in US dollars, China has what it takes to cripple the US economy.
Will China Follow Through With the Threat?
DailyFX.com - However at the same time, we do not think that China will follow through with the threat since China and the US are interdependent. The US is a big importer of Chinese goods and China cannot stop buying US dollars. Their current bond market is one tenth the size of the US bond market.
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Does this present a potential US economy catastrophe? I believe so, not only does China have the power to cripple the US, but it can very well cripple other countries as well as most bonds and trades are made in US dollars.
China will be the next Super Power in this world and everyone knows it. Their economy will continue to improve as ours gets worse. However, as said in the quote above..I do not think China will go through with this threat. China and the US have too many import and export relations and to just quit or get rid of them would be a bad move for either party.
So next time you see a product that reads "made in China" be sure and thank them, for its the Chinese that supply us with cheap alternatives....think about it, if it weren't for the Chinese, the US would be selling those very same toys, clothes etc for literally twice the cost, maybe more.
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