WASHINGTON — The United States on Friday escalated a mounting row on multiple fronts with China, refusing Beijing's demand to cancel President Barack Obama's meeting next week with the Dalai Lama.

The deepening public spat over Tibet, a row over US arms sales to Taiwan, China's dispute with Google and trade and currency disagreements, come at a key diplomatic moment, as Obama seeks Chinese help to toughen sanctions on Iran.

The White House announced Thursday that Obama would hold his long-awaited meeting with the revered Dalai Lama at the White House next week, drawing an angry reaction from China and a demand for the invitation to be rescinded.

Originally posted by dragonsmusic
China OWNS America. This is just TPTB giving the impression that the US will do whatever they want to in regards to China. See! they are saying,
We are sending the POTUS anyway!
No disrespect to the Dalai Lama of course.

The only thing China OWNS are some pieces of Paper that are basically IOU's to be paid out in 30 years.


But I sometimes I forget that this is a Conspiracy site.

In short, China is brimming with confidence, and in recent weeks that self-confidence has turned into arrogance, with scorn for the U.S. There is a long legacy of Chinese distrust of the West. Today, Chinese nationalists cannot explicitly criticize Beijing, but they can indirectly attack the government by challenging the close relationship between the U.S. and China. For many in China, the U.S. is a corrupt nation that bears China no goodwill and will drag China down if Beijing doesn't find a way to distance itself from the American economic embrace. (Comment on this story)

But while many Chinese take delight in America's plight and would like to end the close embrace that has brought China such prosperity over the past two decades, they are falling prey to delusions of grandeur. The fact remains that as much as China may want to go it alone, it cannot. (See pictures of the global financial crisis.)

To begin with, it holds more than $1 trillion in U.S. assets, mainly in U.S. Treasuries. No other country or entity in the world could absorb those assets if China wanted to sell them, and with China's currency value pegged to the dollar, any massive sale would lead to a steep decline in the Chinese currency and economy. China's holding of U.S. debt is leverage only in a theoretical world where it could dump its U.S. assets or stop buying more. What's more, even a hobbled America is the world's largest economy and the most significant market for Chinese goods. In 2009, a supposedly bad year, Chinese exports to the U.S. were approximately $300 billion, about the same as in 2007. That is a vast source of income for China — and one that no other part of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in direct investment in China, from thousands of American companies big and small. While it's true that China doesn't need any one of these companies as much as each one needs China, China needs all of them and depends on them for everything from brand-name goods to know-how and capital. Beijing can't just snap its fingers and go it alone; its domestic economy is far too entwined with that of the U.S., its companies, its capital and its consumers.

There's little question that neither China nor the U.S. wants to be dependent on the other. China's rhetoric of late is proof, and you could easily demonstrate the same attitude coming from Americans. But each country has tied its economy to the other, and buyer's remorse notwithstanding, there is no immediate exit from this relationship. It remains a source of stability and prosperity for both countries. Two decades ago, China cast its lot with the United States, and until recently, that has brought it affluence. Now that things have gotten difficult, the Chinese want out. But when the heady intoxication of these weeks wears off, they will find that they have nowhere else to go.

China has quite the history of threatening to dump its U.S. Treasury bond holdings in retaliation for unspecified U.S. actions or to achieve specific economic ends. Reuters notes that China is currently the largest holder of U.S. Treasuries, and has actually doubled its holdings since 2007.

Some economists think it’s all just posturing, particularly as the military has little influence over economic regulators in China. India’s Daily News & Analysis reports that most analysts recognize that if China dumps its Treasuries, it will do as much damage to its own economy as to the United States’:

[Patrick Chovanec, associate professor at Tsinghua University in Beijing said] “The Chinese economy continues to depend on exporting products for dollars – and accumulating even more dollars,” noted Chovanac. Chinese exports, GDP growth employment — all of it depended on China’s continued ability to sell product for dollars.

In other words, selling Treasuries would devalue the dollar, causing China to hurt its own ability to export to the United States — which is still the engine of its economy. Furthermore, Chovanec added that if China simply wanted to devalue the dollar, it could stop artificially devaluing its currency against the dollar, which is what the United States wants and China has resisted for years.

Dumping U.S. Treasuries en masse would be the economic equivalent of China cutting off its nose to spite its face, and the people in charge of China’s economy recognize that (for now). That there are some there who value the One-China policy above all else is little surprise; that they’re not in charge of China’s economy should come as little, too.