If china stops buying US debt, China's currency will rise – which is what the us has wanted..

[Hannah Bell]

When China's prime minister, Wen Jiabao, expressed concern about the ability of the US government to repay its bonds, his comments prompted headlines everywhere. The newspapers were filled with gloomy warnings that China may no longer be willing to buy up US debt, which supposedly would have dire consequences for us all.

Unfortunately, too little thought was given to what these "dire consequences" might be, and who would end up suffering them. Suppose that China stops buying US government debt. That would mean that the dollar would plummet in value against the yuan. Chinese imports would suddenly become much more expensive for consumers in the United States, making domestically produced items far more competitive....The opposite would happen in China. Goods and services made in the United States would suddenly be much cheaper... The reduction in imports from China and the increase in exports would substantially improve our balance of trade.

In other words, if Wen was threatening to stop buying dollar-denominated assets and therefore let the yuan rise against the dollar, he was threatening to do exactly what the US government has been demanding that China do. He will stop "manipulating" China's currency – meaning he will stop deliberately intervening in the market to keep the yuan's value from rising.

http://www.guardian.co.uk/commentisfree/cifamerica/2009/mar/30/us-economy-china-debt

[BeFree]

1. Got 'em by the short hairs

The Yankee businessman is feared the world over.

It looks like the only solution is a downward spiral for both countries, eh?

[madrchsod]

2. if we "devalue" the dollar china is screwed ....big time

that`s been the problem with china for years....to gain a market they collapse the market because of their currency manipulation and the greed of companies willing sell their production to china to produce huge profits

where are those huge profits now and who will have money to buy those products in the future?

[Deja Q]

6. Agreed.

[Subdivisions]

7. If the Dollar was replaced by a new reserve currency and China

converted their Dollar holdings to the new currency, couldn't they retain their wealth and avoid taking the huge hit a collapsed Dollar would bring to them?

China Takes Aim at Dollar (via IMF, which http://www.bloomberg.com/apps/news?pid=20601068&refer=home&sid=aVevdIrBPtUE">Geithner let slip that he favors)
http://online.wsj.com/article/SB123780272456212885.html

[madrchsod]

8. we did`t get that far in econ101....back then the usa was healthy

no one really thought this scenario would ever happen.

[JVS]

3. The smart strategic move for China is to try to penetrate other markets, but that will be tough.

Basically the only other major consumer cultures which could absorb Chinese goods are Europe, which buys a reasonable amount from China, but already has cheap labor supplies in the Eastern EU (Europe's Mexico) and Russia, or Japan, where stoking the fires of a Chinese economic superpower is seen as far from desirable.

[MUAD_DIB]

4. The markets exist, but does the world

want to be so beholden to China? I don't think that it does or will do that. All they have to do is look at the USA as a cautionary tale.

[Deja Q]

5. Not with the quality of (many/most/well?) Chinese products!

China did this to itself. They have little business whining about our ability to pay back because if we started adding jobs here again, they'd mewl over not getting more jobs.

They want it both ways.

They've manipulated their currency too, to help keep their ersatz situation going.

We may be "interdependent on each other", but they have responsibilities too.