Chinese Military Wants Government to Dump US Government Bonds

to punish Washington over the planned arms sales to Taiwan.

China PLA officers urge economic punch against U.S. (2/9/2010 Reuters)

"BEIJING (Reuters) - 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 interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.

"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."" [Emphasis is mine. The article continues]

So in the eyes of the People's Liberation Army, the U.S. is the disease.

I am not so sure of the usual argument that China will refrain from actually dumping the U.S. Treasuries because that would decimate their foreign reserves, much of which is denominated in U.S. dollar. I have a feeling that the Chinese government couldn't care less, and would be quite willing to take, say 50 cents on a dollar and be done with the U.S.

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