BREAKING: US Treasury Dept. designates China a currency manipulator.

NBC ^

[TigersEye]

IP Man?

[walkingdead]

“They could call the debt. I don’t think that’d be good for us.“

Theoretically, that would mean war.

[jdsteel]

“They could call the debt. I don’t think that’d be good for us.”

That is quite impossible. They only have two choices; hold the debt to maturity or sell it. The entire world is head over heels in love with US debt (see low mid and long term interest rates for your clue). What they have left, after selling some off over the last several years, wouldn’t make a difference.

A result of them selling US Treasury holdings would RAISE the value of the Yuan....the exact opposite of what they want to do.

[jdsteel]

“I suppose we could declare the debt void and see what they try to do about it.”

That would never happen. What we COULD do is put the interest payments into escrow.

[Phillyred]

Problem is more than half of our elected representatives are loyal to mainly China and other nations, not the US! That reminds me, has Diane Feinstein found a nee driver yet?

[semimojo]

China has an export economy....they will drown in cheap consumer goods they can’t eat.

Exports account for about 9% of China's GDP and about 8% of the US'.

About 20% of their exports go to the US.

[103198]

May I also suggest the following additions?

5) They have a very high debt to GDP ratio (twice USA).

6) They have poor accounting practices.

7) Their local banks have sold off most of the US dollars they held.

[NorseViking]

There is no such thing as Western style diplomacy for quite some time already.

[MortMan]

The fact that discussion of the Chinese threat ceased two decades ago tells me much.

[Does so]

China has picked a bad time to amass troops on the border with Hong Kong.

[noiseman]

”Four things in our favor here: 1) China cannot feed itself 2) China has an export economy....they will drown in cheap consumer goods they can’t eat. 3) They have been exercising everything they could to squeeze us for 30+ years. They have nothing left to squeeze except the last drop of their blood from their currency. 4) They know they are militarily inferior.”

You are exactly right. Also consider that if this situation continues to escalate, China will find itself unable to maintain its military or pay its troops (see: Russia - but for different reasons). That’s still in the long-term, but I just don’t see anything but disaster for China if they continue to dig in their heels.

China’s economy has been built on smoke and mirrors, and on their ability to strong-arm greedy and gullible western companies into turning over all of their intellectual property, at least that which China didn’t already steal. Trump is forcing all parties involved to finally face the reality of what has been happening with this relationship. I hope he remains steadfast in his resolve.

[mac_truck]

That’s a 4-bet. Trump knows he’s holding the nuts.

Well said...someone is calling finally China's bluff.

[Freeborn]

I’m damn sure. Their vulnerability is the 3 Gorges Dam. A focused strike on it and the flash flood will destroy 60%+ of their infrastructure in a matter of minutes.

[butlerweave]

China’s Leader , Mr Yogi Bear goes , “Do’h”

[Jumper]

China has manipulated their currency since the mid 80s or even earlier. If you force their currency to be value oriented as referendum on their economy, and at the same time impose a big traffic which itself alone will put their economy under even or at a net loss... Without Iran sanctions... That net loss is a fixed value currency loss and if not in a recessionary period the nexus of both fixed and tariffs squeeze than harder that George V’s colonists ever felt. Simply put any other erosion of iconic performance turns them into Spain’s economic situation. Six months of tariffs and currency value pain is literally setting up accelerated disengagement.

[RedEyeJack]

What does devaluation of their currency do to the value of the treasury bonds they own? Won’t it devalue the bonds in terms of dollars?

[Churchillspirit]

You are asking the wrong Freeper.

[Zhang Fei]

What does devaluation of their currency do to the value of the treasury bonds they own? Won’t it devalue the bonds in terms of dollars?

The bonds are now worth more in yuan. Are currency devaluations a bad thing for a country's economy? So far it's worked out pretty well for China. Assuming the country's economic policies are mostly sound in other respects (i.e. not like Zimbabwe's or Venezuela's), devaluations do improve a country's competitive position. Here's China's USD-CNY exchange rate history:

 

World Bank annual average middle exchange rate for US dollar to Chinese yuan[8] ( 1 US dollar to Chinese yuan )
Year	US dollar	Year	US dollar	Year	US dollar	Year	US dollar
2019		2004	8.2768	1989	4.9400	1974	1.9612
2018	6.98	2003	8.2770	1988	4.8600	1973	1.9894
2017	6.89	2002	8.2770	1987	4.4600	1972	2.2451
2016		2001	8.2771	1986	3.4500	1971	2.4618
2015		2000	8.2784	1985	2.9400	1970	2.4618
2014		1999	8.2783	1984	2.8000	1969	2.4618
2013		1998	8.2791	1983	2.6100	1968	2.4618
2012	6.3123	1997	8.2898	1982	2.6200	1967	2.4618
2011	6.4615	1996	8.3142	1981	2.5200	1966	2.4618
2010	6.7703	1995	8.3507	1980	2.4000	1965	2.4618
2009	6.8300	1994	8.6187	1979	2.3000	1964	2.4618
2008	6.9451	1993	8.0213	1978	2.4600	1963	2.4618
2007	7.6075	1992	6.3700	1977	1.8578	1962	2.4618
2006	7.9734	1991	5.7400	1976	1.9414	1961	2.4618
2005	8.1943	1990	5.2300	1975	1.8598	1960	2.4618

If you examine the numbers at this link, you'll note that China went from dead even with India (and in the bottom 10% of all countries) in the late 70's, to 4x India's economic output per capita a few years ago, and the top third of all countries listed. Currency valuations are key to a country's competitive position, which is why so many countries with big trade surpluses against the US keep their reserves in dollars, and buy Treasury bonds with those dollars to earn some interest. They want to prevent their currencies from becoming more valuable against the dollar. Because to sell those dollars means their currency goes up, making their goods more expensive in the US market, and elsewhere.

[Zhang Fei]

What it also does is make the dollar-denominated bonds issued by Chinese companies - to take advantage of lower US interest rates - much more expensive to service. So if these companies were previously under any financial strain, that stress has gone up a notch, because they will need to produce more yuan to buy the same number of dollars necessary to make interest payments every 6 months.

[SteveH]

if i buy jp yen now and sell them for us$ just before the tokyo jp 2020 summer olympics, would i be a currency manipulator too?