"Unloading Dollar Assets Would Be Most Effective" - Chinese State Media Unveils Trade War 'Countermeasures'

Tyler Durden's picture

After President Trump declared "economic war" with China, seemingly following Bannon's strategy to maintain hegemony...

“We’re at economic war with China,” he added. “It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path.

 

Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote. Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.

 

“To me,” Bannon said, “the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we're five years away, I think, ten years at the most, of hitting an inflection point from which we'll never be able to recover.”

China state media immediately signaled the nation would hit back against any trade measures, as it has done in past episodes, and now, thanks to a treatise in Chinese official mouthpiece, China People's Daily newspaper, we have an idea of what those countermeasures could be...

China could take three countermeasures against the recent “Section 301” investigation initiated by the U.S. government, experts told Chinanews.com.

 

With growing trade friction between the two largest economies, the spokesperson of China's Ministry of Commerce made a strong response on Monday, saying China strongly opposes unilateral and trade protectionism acts conducted by the U.S., and will take all appropriate measures to safeguard its legitimate interests.

 

According to the report, limiting imports from the U.S., reducing exports to the U.S., and unloading dollar assets would be the most effective countermeasures.

 

China is America's largest export market behind the North America region, and also one of the fastest-growing export markets of the U.S. Uncle Sam relies heavily on China for trade.

 

Statistics show that the annual growth in exports from the U.S. to China averaged 11% in the past decade, almost twice the figure of Chinese exports to the U.S. Sixty-two percent of soybean, 14% of cotton, 25% of Boeing aircraft, 17% of automobiles, and 15% of integrated circuits produced by the U.S. have been shipped to China.

 

In addition, China is the second-largest export market of American agricultural products, buying 15% of the total export volume, according to U.S. government data.

 

Against such a backdrop, restricting imports of agricultural products and high-end goods would be a trump card for China as a counter action.

 

Marcus Noland, executive vice president of the Peterson Institute for International Economics, once said during an interview that it would be destructive if China limits the imports of American soybean and aircraft.

 

In addition, being the largest export market of China, the U.S. enjoys the benefits of cost-effective “made-in-China” products.

 

According to data released by the US-China Business Council, trade with China has saved American families $850 in 2015 on average. Oxford Economics estimates that China's low-price goods have resulted in a 1-1.5% lower price level in the U.S.

 

At a time when Americans are expecting Donald Trump's new trade policy to improve the current situation, the bilateral trade conflict would be damaging, said Lian Ping, chief economist of the Bank of Communications. Even small losses are unacceptable, he added.

 

Besides, China regained the title of Uncle Sam's largest creditor in June. America's financial stability would be impacted if China unloads its dollar assets on a large scale.

 

However, these three countermeasures would also harm China. As Chinese officials have stressed, there is no winner or future in a trade war.

 

Because of the resilience and huge potential of the Chinese economy, the U.S. would be worse hit in the long run, said Wang Wen, executive dean of the Chongyang Institute for Financial Studies at Renmin University of China.

 

With a complete industrial system, China is the only country in the world that owns all industrial sectors listed in the United Nations industrial classification of all economic activities.

 

Once conflict deepens, America's losses may not necessarily be less than China's losses, noted Bai Ming, executive director of the Institute of International Trade of Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

 

Mutual benefit leads to win-win results. Only by the joint efforts of both parties can trade relations between the two countries be pushed forward in a healthy manner.

As a reminder - and the following chart suggests - "nothing lasts forever" and time is ticking...

Source: The Burning Platform

As we noted previously, history did not end with the Cold War and, as Mark Twain put it, whilst history doesn’t repeat it often rhymes. As Alexander, Rome and Britain fell from their positions of absolute global dominance, so too has the US begun to slip. America’s global economic dominance has been declining since 1998, well before the Global Financial Crisis. A large part of this decline has actually had little to do with the actions of the US but rather with the unraveling of a century’s long economic anomaly. China has begun to return to the position in the global economy it occupied for millenia before the industrial revolution. Just as the dollar emerged to global reserve currency status as its economic might grew, so the chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet...

 

The World Bank's former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

"The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency."

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Five Star's picture

Sounds nice, but more than half of chinese millionaires say they are thinking about leaving China, 84% because of yuan depreciation. So...

http://thesoundingline.com/half-chinese-millionaires-thinking-leaving-ch...

takeaction's picture

HAHAHAHAHAH...China ain't doin shit...we run this fucking show.  Americans are so spoiled with Wal-Shit.....and everything CHEAP.....Limit your exports to the USA....good...how about you put your money where your mouth is and CANCEL all exports...100% BULLSHIT.  You built a country by providing shit products with slave labor......show me how you go away from that.....

.

.

.

you don't.

you can't

you won't....FU

The Cooler King's picture

China would be happy to build you a living room furniture ensemble & retail price it at $20k, so that OVERSTOCK.com can sell it to 'shapeshift' coin dupes and advertise a 70% off sale, (so that those same dupes can refurbush the house that USED to be full of silver bullion but is now empty & they're sitting on the floor).

 

While they (China) mine the last of the bitcoins...

Justin Case's picture

Merican corporate profits will be hit hard if mericans are cut off of the goods they manufacture in China. What country will substitute the iPhones. Pandemonium will break out in merica if the snowflakes can't get them. Trump is doomed now. Boeing shares will tumble. Hey maybe this is the event that pops the DOW bubble and Yellen will get her inflation. There are a few thousand merican corporations that build cheap shit for merican's to consume. Then merica's complain cheap shit is useless from China. LOL, the merican corporations produce that shit over there. Did they lower their quality for profits? Looks like it. It's China's fault! China doesn't enforce minimum standards on the merican corporations opertating there. Boycott Merican corporations in China, oh wait, those are also called sanctions.

ProsperD9's picture

Yeah...but the problem is that the US does not produce anything. And soon countries will not be accepting the dollar so how will the US stock the shelves of Walmart and other stores? US DOES NOT run the show anymore. It's over...the gig is up. 

ReturnOfDaMac's picture

"the US does not produce anything" - I call bullshit!  Our printers produce the finest, most pristine, paper in the world!  Everybody wants our paper products the world over.  Don't produce anything, hmmmpf!

ProsperD9's picture

BWAHAHHA...yes the DOLLAR takes up a lot of paper and ink....! Soon, US will be able to save on paper and ink supplies  (since all those dollars will be coming to US shores)  and perhaps put the additional money towards paying the debt!  

ReturnOfDaMac's picture

Nah Prosper, we will do the whole world a favor.  Since we are an exceptional people, we will tell the world to keep it, we can print more.

The_Juggernaut's picture

Yep, US produces nothing.  China will have no problem picking up those 12 million tons of soy from somebody else, right?  They'll either starve or bo broke (both) if they try any bullshit.

eforce's picture

TPTB seem to have rigged it so both China/USA are equally fucked and a global currency will be the proposed solution as a result.

DWD-MOVIE's picture

I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

halcyon's picture

Brazil. Look it up on a map. 

ProsperD9's picture

Too late....nations are dropping the dollar as we speak and won't hold it as a reserve currency any longer. Countries will no longer accept America's printed money. Wealth and propserity are headed Eastward. Any new printed money by the US will REMAIN in the US. It will be a domestic currency. You'd better prepare and store supplies because the shelves within the next year are going to start getting empty. Trump is fighting hard to prepare the country but the idiots won't let him.

ReturnOfDaMac's picture

Then we have nothing to fear.  We are the ultimate badass.  'Murica is still chock full of dog rations from the y2k end of the world scare campaign.  We got whole states full of corn, wheat, fruits, pigs, chickens, and steers.  We got tech. We got bank.  We got sonic, electronic, ballbusters. You do not want to f..k with us.

ProsperD9's picture

Well...good luck with the GMO chicken, fruits, pigs, corn, etc. Can't eat the fish from the Pacific Ocean near California it's too full of radiation. The banks are standing on their last legs. Oh, by the way....you'd better get any money out while you can. There won't be any left in the banks if you wait too long. Those ATMs will be out of business. The Bail-Ins will take whatever you have sitting in your account. You are right, nobody wants to fawk with America because it no longer has anything to offer but trouble. America has gone rogue. If you are preparing for what's happening and more to come within the next two years...then you are being smart. 

ReturnOfDaMac's picture

On the serious side, I am a true American, we are always prepared for any eventuality.  Although nothing is likely to happen at all except tough tweets and more whitehouse firings.  We got great like minded neighbors, supplies, radios, power generation, food, and the most precious metals of all (copper coated brass encased lead).

ProsperD9's picture

If you mean "personally" being prepared then good for you. Other than that. the Deep State in the US is running around in a panic looking for another war to distract the people because the country is not prepared for shit. I feel sorry for Americans. So naive....Good Luck

Justin Case's picture

Until cyrpto currencies showed up. Who needs SWIFT? Who needs banks? Who needs Gov't scrutiny?

The US is a cadaver with the support tubes still connected to give the impression it will come back to life at any moment. It's over, the rest is just an illusion with retoric and fake news.

ReturnOfDaMac's picture

Ah Justin, but we are BEST at marketing!  Just look at how we, who is growing at maybe 2% is the envy of the world while we are all critizing China who is growing at over 6%.  Look deeply into my eyes, you and the rest of the world will take our paper and you will like it.

Justin Case's picture

Every single fiat currency ever created by man has failed and merica is no exception. You are witnessing it right now. Depending how braod yoar resources of information are of course, you might no see it yet.

ReturnOfDaMac's picture

We are exceptional! Exceptional I tell ya.  Exceptional!

arby63's picture

Don't be retarded. The U.S. doesn't produce anything? In what dimension do you exist?

ProsperD9's picture

Weapons and trouble that's about it....LOL

Give Me Some Truth's picture

We better get this play going to its logical conclusion. If we are going to have to "do it on our own," we need to do it before all the people who remember how we once did it ... die. 

arby63's picture

China is full of shit. I hope to god they do even one thing they sing about. We're in this mess because of greed; not because we need China. Fuck. That.

 

Justin Case's picture

Something to munch on fellow mericans. hundreds of merican corporations operate in China that contribute to these export figures. That's why you ain't got jobs other than the waiters and bar tenders. Yoar Gov't sold you out to the corporations.Democracy is morphed into corporatocracy.

China total Global exports $2.098 Trillion 2016 est.
United States Global exports $1.471 Trillion 2016 est.   

Top 10 Chinese Exports to the US

China's exports to America amounted to
$388.1 billion or 18.3% of its overall exports.

  1. Electronic equipment: $93.3 billion
  2. Machinery: $79.5 billion
  3. Furniture, lighting, signs: $27.8 billion
  4. Knit or crochet clothing: $16.1 billion
  5. Toys, games: $14.9 billion
  6. Clothing (not knit or crochet): $14.4 billion
  7. Vehicles: $13.9 billion
  8. Plastics: $13.4 billion
  9. Footwear: $12.2 billion
 10. Medical, technical equipment: $9.9 billion

America's exports to China amounted to
$135 billion or 8.5% of its overall imports.

  1. Electronic equipment: $15.9 billion
  2. Machinery: $14.5 billion
  3. Oil seed: $14.4 billion
  4. Vehicles: $14 billion
  5. Aircraft, spacecraft: $13.2 billion
  6. Medical, technical equipment: $11.1 billion
  7. Plastics: $6.1 billion
  8. Woodpulp: $3.8 billion
  9. Pharmaceuticals: $3.2 billion
10. Organic chemicals: $3 billion

BurningFuld's picture

Canada global exports 534 billion divided by 33 million population = $16,181 per

USA 1.4 trillion divided by 350 million = $4000 per

China 2 trillion divided by 1.38 billion = $1449 per capita

Who's your daddy now? 

Justin Case's picture

Profit not volume counts here, that's why the corporatocracy abadoned the merican people, for profits.

DemandSider's picture

Strange. No American aquifer (ag) exports to the PRC in your list. According to The USDA, aquifer esports from the U.S. to PRC as late as fiscal year 2015 were $29.5 billion, the largest sector of exports by far. Why did you leave that off?

https://www.usda.gov/media/press-releases/2015/11/20/growth-us-agricultu...

 

 

Justin Case's picture

we run this fucking show.

He who has the gold runs the show. merica has none, the emporer has no clothes. Not even a fig leaf.

Give Me Some Truth's picture

The truth is we don't know how much gold America really owns, or how much gold China really has.

Best guess: America owns a lot less than our government says it does. China owns a lot more than its government says it does.

Call it the "gold card." No one's played it yet, or turned it over.

Mustafa Kemal's picture

They will, they can. All will lose. 

Grumpy6's picture

Trump knows the Chinese financial sector is a house-of-cards, and he intends to exploit that condition.  The Chinese Communist Party is very nervous about anything that could trigger large-scale unemployment because that would exacerbate political instability.  He is PSYOPing them into a tizzy so they will be willing to cut a deal with him rather than risk higher unemployment and riots.

Mr 9x19's picture

don't get wrong.

 

look china mid class increase speed compared to europ & usa.

 

you do not understand is after they used west to build their mid class, they just have to recenter production, and THERE ARE ACTUALLY DOING IT.

xiaomi, etc..

all chinese brands making standards 30% less price west ones. they are re-centering to inner market, at slow pace, it is happening.

 

what happen if noone take stuff from shenzen to bring em to amazon wepages...

amazon is smaller than ali express....

 

you should not be so dicky about your country, you are loosing it, admit it.

algol_dog's picture

All they'd have to do is dump their UST's. How hard is that?

buzzsaw99's picture

paradoxically if they dumped all their USTs rates would go down then they would have to pay more to buy them back.

sinbad2's picture

If they dumped there US treasuries, bond rates would have to rise substantially to convince others to buy them.

If you look at the US economy, from outside the US, it's a nation of high debt, and stagnant GDP.

So based on the higher the risk the higher the interest, the US should be paying at least 5%.

Give Me Some Truth's picture

Re: Interest rates for U.S. debt

 Given our current national debt and our unfunded liabilities, interest rate on American debt should be "Junk" with a couple of +s on top of the junk rating. If interest rates represent default risk, interest rates SHOULD be 20 percent or higher.

Isn't it convenient that the Fed gets to set interest rates? And the Fed and Treasury get to create as many computer digits are necessary to pay all our bills? 

P.S. That debt and government expenses are going to get even higher with the massive flooding in Texas. I predict this "crisis" will make it even more likely that the House and Senate pass a debt-ceiling increase before armageddon. "Helping the people of Texas" might be the bi-partisan spin that closes the deal.

Give Me Some Truth's picture

If a nation really thinks America is about to implode, why would they want to buy back this nation's bonds/debt?

One of the main reason China has been surreptitiously yet agressively acquiring every ounce of gold it can for years is to prepare for the day when they dump all U.S. treasuries. What they lose in net worth from depreceating U.S. bonds they will make up with appreciating gold prices. It's the ultimate hedge. But gold's value will not ultimately be determined by the "faith and credit" of the U.S. government.

 

 

ET's picture

They would lose massively. It would be like a murder-suicide.

Iskiab's picture

Yes it would, but china isn't beholden to national corporations like the USA is. Trump will make noise, but at the end of the day Chinese are most worried about keeping control and will go to any lengths to maintain control, US politicians will go as far as their campaign finders and lobbyists will let them.

Winston Churchill's picture

Considering that they've been plannining for this day since 2009,

some would argue 1993 with SCO foundation,I doubt they even hold any UST's directly.

The clue was making the PBoC a primary dealer, and the FedRes buying the toxic MBS back

from them at par.Now all we have is our Govt. telling us they hold USTs.

See the problem ?

 

Justin Case's picture

The entire political and social discourse in America has declined to the point that most of what I hear on US MSM TV is asinine, inane, absurd, ludicrous and preposterous. Only in America has the discussion of what matters for the future of a nation and its people been reduced to the level of banal and vapid.

If you pay attention to facts and truth, it does not take long to see MSM for what it is; Sheeple Food for ignorant sheep.

Americans are lied to so much, or given the ‘mushroom treatment’ to the extent that completely uninformed people suddenly act like they are world-renowned experts on a subject. In reality they do not know the difference between shit and shinola they are so buried in the former and kept out of the light or any form of enlightenment.

Give Me Some Truth's picture

Re: Experts

I like your post. I think a large part of our problem is that "uninformed people" put way too much trust in "world-renowned experts." These people should be called "alleged experts." Most of them are full of shit. But, with the death of critical thinking, or just disinterest or distraction, no one calls BS on the experts' conclusions, nor ever questions the experts' prescriptions or courses of action. (Okay, a few people challenge the alleged experts and authority figures, but the vast majority of Americans do not).

The problem is we are following experts who are not really experts, and who are leading us off one cliff after the other.

The real problem is the "uninformed people" who don't know enough to ignore bogus experts. Said differently, we are the problem. 

 ... Now show me the politician who is going to run for office with the campaign platform"You voters are dumb as shit and should be ashamed of yourselves."

Arrow4Truth's picture

I love to question so-called experts. They always show themselves to be, how did you put it, "not really experts" thereby getting their entire testimony... thrown out. 

Pernicious Gold Phallusy's picture

I don't think the people who run things take US TV very seriously, except as a propaganda outlet to get what they wish.

Justin Case's picture

people who run things take US TV very seriously

They feed the media with shit that media disseminates to the sheeple. A partnership. Also used to demonize leaders of sovergein nations so the MIC can get some action while the CIA installs a puppet for DC.

Justin Case's picture

It'll be slow like CIA water boarding.

Trump will get his wishes of a lower USD and Yellen will get her inflation to raise rates and merican citizens will get it up the ass.