FacebookTwitterGoogle+RedditEmail

China Plays the Euro Card

Buried on page 3 of the business section of The New York Times on January 7 was an obscure article reporting that China had committed to purchase 6 billion euro ($7.8 billion) worth of Spanish bonds.  What went unnoticed by the writer was that the economic and political consequences of such an event could be quite far reaching.

China currently has $2.7 trillion in foreign currency reserves, over $900 billion of which takes the form of U.S. Treasury debt.  For years critics of U.S. monetary policy have argued that in response to low yields on U.S. Treasury notes and the risk of a precipitous decline in the value of the dollar, China might pull the plug on its U.S. Treasury investments.  Others claim that this will never happen because the Chinese economy is so dependent on exports to the United States, which could dry up if China were to trigger a collapse of the U.S. economy by its actions.

In the meantime, the White House continues to harass China on its human rights record as well as what the U.S. claims is the inflated value of the Chinese currency, the yuan.  When China refused to allow Nobel Peace Prize winner Liu Xiaobo to go to Oslo to receive the prize, China was subjected to intense criticism by Washington.

In a series of recent visits to European capitals China’s executive deputy prime minister Li Keqiang promised Chinese support for European Union economies.  By pledging to buy bonds worth billions of euros and committing billions more to European based business deals, could Beijing be signaling to Washington that “enough is enough”?  By investing in European economies, China strengthens one of its other most important export markets and makes itself less dependent on the United States.

It is interesting that Spanish bonds should be the first euro-denominated government investment made by China.  Spain is arguably the most independent country in the EU.  Its prime minister, Jose Luis Rodriguez Zapatero, is the only leader in Europe who has the guts to stand up to Washington, Tel Aviv, and the Vatican.  The Spanish socialist government is also the most left-leaning government in Europe today.

Spain has significant strategic holdings in Latin America and Africa, two parts of the world where China would like to expand its influence in its quest for oil and other natural resources.  Playing the Spanish card was a stroke of genius by Beijing.

I believe there are two reasons why Washington has not succumbed to Israeli pressure to take out Iran’s nuclear program.  First, Russia could severely damage the European economy, if it were to cut off the supply of natural gas to Europe in retaliation.  Second, China could precipitate the collapse of the U.S. economy, if it were to walk away from U.S. Treasury bonds.  By stepping in to help bail out the European Union, China demonstrates that the threat of pulling the plug on its investments in U.S. Treasury securities is a credible one.

The only thing surprising about China’s move on Europe is that it didn’t happen sooner.  But the message from Beijing to Washington is loud and clear, “Don’t mess with us, or Iran.”

THOMAS H. NAYLOR is a professor emeritus of economics at Duke University. He is the co-author of Downsizing the U.S.A. and The Abandoned Generation: Rethinking Higher Education and co-founder of the Middlebury Institute.

 

More articles by:
Weekend Edition
September 21, 2018
Friday - Sunday
Paul Street
Laquan McDonald is Being Tried for His Own Racist Murder
Alexandra Isfahani-Hammond
Hurricane Florence and 9.7 Million Pigs
Nick Pemberton
With or Without Kavanaugh, The United States Is Anti-Choice
Andrew Levine
Israel’s Anti-Semitism Smear Campaign
Jim Kavanagh
“Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program)
Jonathan Cook
Palestine: The Testbed for Trump’s Plan to Tear up the Rules-Based International Order
Jeffrey St. Clair
Roaming Charges: the Chickenhawks Have Finally Come Back Home to Roost!
David Rosen
As the Capitalist World Turns: From Empire to Imperialism to Globalization?
Jonah Raskin
Green Capitalism Rears Its Head at Global Climate Action Summit
James Munson
On Climate, the Centrists are the Deplorables
Robert Hunziker
Is Paris 2015 Already Underwater?
Arshad Khan
Will Their Ever be Justice for Rohingya Muslims?
Jill Richardson
Why Women Don’t Report Sexual Assault
Dave Clennon
A Victory for Historical Accuracy and the Peace Movement: Not One Emmy for Ken Burns and “The Vietnam War”
W. T. Whitney
US Harasses Cuba Amid Mysterious Circumstances
Nathan Kalman-Lamb
Things That Make Sports Fans Uncomfortable
George Capaccio
Iran: “Snapping Back” Sanctions and the Threat of War
Kenneth Surin
Brexit is Coming, But Which Will It Be?
Louis Proyect
Moore’s “Fahrenheit 11/9”: Entertaining Film, Crappy Politics
Ramzy Baroud
Why Israel Demolishes: Khan Al-Ahmar as Representation of Greater Genocide
Ben Dangl
The Zapatistas’ Dignified Rage: Revolutionary Theories and Anticapitalist Dreams of Subcommandante Marcos
Ron Jacobs
Faith, Madness, or Death
Bill Glahn
Crime Comes Knocking
Terry Heaton
Pat Robertson’s Hurricane “Miracle”
Dave Lindorff
In Montgomery County PA, It’s Often a Jury of White People
Louis Yako
From Citizens to Customers: the Corporate Customer Service Culture in America 
Ernie Niemi
Logging and Climate Change: Oregon is Appalachia and Timber is Our Coal
Jessicah Pierre
Nike Says “Believe in Something,” But Can It Sacrifice Something, Too?
Paul Fitzgerald - Elizabeth Gould
Weaponized Dreams? The Curious Case of Robert Moss
Olivia Alperstein
An Environmental 9/11: the EPA’s Gutting of Methane Regulations
Ted Rall
Why Christine Ford vs. Brett Kavanaugh is a Train Wreck You Can’t Look Away From
Lauren Regan
The Day the Valves Turned: Defending the Pipeline Protesters
Ralph Nader
Questions, Questions Where are the Answers?
Binoy Kampmark
Deplatforming Germaine Greer
Raouf Halaby
It Should Not Be A He Said She Said Verdict
Justin Anderson
Don’t Count the Left Out Just Yet
Robert Koehler
The Accusation That Wouldn’t Go Away
Jim Hightower
Amazon is Making Workers Tweet About How Great It is to Work There
Robby Sherwin
Rabbi, Rabbi, Where For Art Thou Rabbi?
Vern Loomis
Has Something Evil This Way Come?
Steve Baggarly
Disarm Trident Walk Ends in Georgia
Graham Peebles
Priorities of the Time: Peace
Michael Doliner
The Department of Demonization
September 20, 2018
Michael Hudson
Wasting the Lehman Crisis: What Was Not Saved Was the Economy
John Pilger
Hold the Front Page, the Reporters are Missing
FacebookTwitterGoogle+RedditEmail