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China and its retaliation against the US

in ASIA/ECONOMY by

A drawback in purchases – or a fire-sale – of US Treasuries could devastate the global economy if China presses the red button. Tariffs will hurt, certainly. The biggest trade powers engaged in a protectionist tit-for-tat will end badly for the entire global economy. But Cui’s not-so-veiled threat is something bigger. There, in June 1997, then-Japanese Prime Minister Ryutaro Hashimoto was giving a rather dry speech about economic cooperation. That was until the question-and-answer period, when he suggested Tokyo might sell Treasuries holdings if Washington didn’t reduce dollar-yen volatility. “Several times in the past we have been tempted to sell large lots of US Treasuries,” he said. The issue flared up anew in August 2011. Beijing was unhappy with then-US President Barack Obama’s perceived closeness to Taiwan. That had policy wags mulling creative ways to get the White House’s attention, including using Beijing’s vast dollar holdings as leverage. “Now is the time,” the state-run People’s Daily argued in an editorial on the topic, “for China to use its financial weapon to teach the US a lesson.” 

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