I'm all for living in interesting times, but certainly the types of things we have been living through the past decade, and some of the various paths coming in the next 10-15 years, are going to make "interesting" an understatement. The top story on Reuters right now is quite fascinating as it speaks to some potential fissures in the Chimerica relationship. [Aug 30, 2009: Chimerica Headed for Divorce] How much of this is real, and how much is political theater is unknown - but it certainly is one to store in the back of memory for future use.
- Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.
- The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.
- The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings. Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.
- While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.
- "Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences. "Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."
- Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington. "For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said.
- China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October. But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.
- China has condemned previous arms sales, but has taken little action in response to them. But Luo said the country's growing strength meant that time has passed. "China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying. "That is inevitable with rising national strength."