Problems Pile Up in Asia for US Policymakers

[News_Editor]

US Secretary of State John Kerry gestures during a news conference at the Asia Pacific Economic Cooperation (APEC) ministerial meeting in Nusa Dua, Bali island, on Oct. 5, 2013. (Photo: Reuters / Beawiharta)

WASHINGTON ” While the Obama administration is making diplomatic progress on some of the Mideast's thorniest security issues, problems are piling up in Asia, a region that President Barack Obama had wanted to play a bigger part in American foreign policy.

Despite efforts to forge deeper ties with China to make East Asia more stable, Beijing's declaration of a maritime air defense zone has escalated its territorial dispute with US ally Japan. The United States responded by flying B-52 bombers through the zone on a training mission Tuesday without informing Beijing.

Analysts say the risk of a military clash between the Asian powers has gone up a notch—a serious concern for the United States because its treaty obligations mean it could be drawn in to help Japan.

Meantime, relations between America’s core allies in the region, Japan and South Korea, have deteriorated. South Korea is bitter over Japan’s attitude toward its colonial past and wants more contrition from Tokyo for Japan’s use of Korean sex slaves in World War II.

That complicates the strategic picture for the Obama administration as it looks to advance its so-called pivot to Asia and strengthen not just its own alliances, but get its partners in the region to collaborate more.

“The region is moving in a very problematic direction,†said Evans Revere, a former senior US diplomat and East Asia specialist. “That’s the result of territorial disputes, historical issues, long-standing rivalries and the inability of countries to put history behind them and move forward in improving relations.â€

Adding to this witches’ brew of bickering in the region, Washington is grappling with the threat posed by an unpredictable North Korea. The deal the United States orchestrated with Iran to temporarily freeze its nuclear program, despite three decades of animosity, is a stark reminder of the impasse in negotiations with Pyongyang.

Unlike Iran, North Korea already has a nuclear bomb, and there’s worrying evidence it is pressing ahead with weapons development.

Vice President Joe Biden will broach these issues when he travels to Japan, China and South Korea next week—a trip to demonstrate that the top level of the administration remains focused on Asia.

The administration said that in Beijing, Biden will meet with Chinese leaders including President Xi Jinping and will voice concern about what it calls an emerging pattern of behavior by China that is unsettling to its neighbors. The vice president will also make clear the firm US commitment to its allies and its desire for a lowering of tensions between China and Japan, the world’s second- and third-largest economies.

Secretary of State John Kerry hasn’t neglected the region, but his primary focus is on the Mideast and is likely to remain that way as he strives for the distant goals of an end to Syria’s civil war, peace between Israelis and Palestinians and a comprehensive nuclear agreement with Iran after the current pact expires in six months.

US domestic woes have contributed to a narrative that Asia is a secondary concern to the administration.

Obama was forced to cancel a four-nation trip to the region in October because of a partial US government shutdown and threat of a debt default. He’ll travel to Asia in April instead.

Obama made Asia a foreign policy priority when he took power in 2009 and has been particularly active in engaging China. Not known for the personal touch with foreign leaders, Obama sought to cultivate a relationship with new leader Xi when he met him in June at a California resort. That’s part of a strategy to promote cooperation between the world’s two largest economies and prevent their rivalry in the Asia-Pacific from spawning conflict.

But China’s declaration of its East China Sea air defense zone will be viewed as unhelpful. It was rejected by Japan, South Korea and Taiwan and prompted quick expressions of deep US concern that it could escalate tensions in the region.

“This really casts a bit of a pall over efforts to improve [uS-China] relations,†Revere said.

The United States said it would not change how it conducts military operations in the region and flew a pair of B-52 bombers through the zone Tuesday on what officials said was a long-planned training mission.

China’s Defense Ministry said Wednesday it had detected and monitored the bombers. It said all aircraft flying through the zone would be monitored but made no mention of a threat to take “defensive emergency measures†against noncompliant aircraft that was included in an announcement Saturday.

Bonnie Glaser, a China specialist at the Center for Strategic and International Studies, expected Biden to raise the issue with civilian and military leaders in China. She said that while countries have a right to declare such a zone—the United States, South Korea and Japan all have them—there will be concern about how China would enforce it.

“The question is how many times China will scramble their jets and against whom,†she said.

State Department spokeswoman Jen Psaki said Wednesday that China had announced the zone without prior consultation with other nations, although it overlaps existing air defense zones of both Japan and South Korea.

Most provocatively, the Chinese zone encompasses unoccupied but Japanese-administered islands that Japan calls Senkaku and China calls Diaoyu. Since Japan nationalized some of the islands a year ago, there’s been a constant cat-and-mouse between the two nations’ sea vessels and aircraft.

There’s been no skirmish, although Japan accused China in January of locking targeting radar on a Japanese helicopter and frigate, which underscored the risks of a clash.

The post Problems Pile Up in Asia for US Policymakers appeared first on The Irrawaddy Magazine.

Source: Irrawaddy.org

[Scott]

Moved to World News

[NeverSure]

And to those in another thread who said the US wouldn't do any thing for Japan...

Hmm... Ran some B52's through there without permission huh? No one lays a glove on Japan or S. Korea or The Philippines or Australia, NZ.... Not so sure about Thailand which likes China. It can keep China.

China perceives Obama as weak and is testing him. The US simply can't, if only for economic reasons, let Japan down.

[Credo]

I have to agree with you, Neversure. GWB was more of a 'go it alone' type of guy, but Obama is more of coalition type person. This is pretty easy, really. We have treaties with these countries and they are being bullied by China. The US will assist and defend them.

[NeverSure]

Yeah, if China makes too much noise, there will be a couple of carrier groups in there flying "training missions" off the decks all through that airspace. Commercial jets may find themselves with escorts.

[craigt3365]

And to those in another thread who said the US wouldn't do any thing for Japan...

Hmm... Ran some B52's through there without permission huh? No one lays a glove on Japan or S. Korea or The Philippines or Australia, NZ.... Not so sure about Thailand which likes China. It can keep China.

China perceives Obama as weak and is testing him. The US simply can't, if only for economic reasons, let Japan down.

I read today that the treaty the US signed with Japan obligates the US to protect them. Have you read about this?

[NeverSure]

And to those in another thread who said the US wouldn't do any thing for Japan...

Hmm... Ran some B52's through there without permission huh? No one lays a glove on Japan or S. Korea or The Philippines or Australia, NZ.... Not so sure about Thailand which likes China. It can keep China.

China perceives Obama as weak and is testing him. The US simply can't, if only for economic reasons, let Japan down.

I read today that the treaty the US signed with Japan obligates the US to protect them. Have you read about this?

Yes. It's been in place for decades. The US also has such treaties with Australia, NZ, Thailand, The Phils, S. Korea and surely I'm forgetting something. This is apart from SEATO which never fully got off the ground.

Those treaties, ratified by the US Congress (2/3 majority) work both ways in that Japan et al will also fall in to help the US if needed.In writing, that means that if, say, China attacked Japan, that all of those countries would dive in to help the US. I doubt all would but the US would keep its word. It can't afford not to.

Edit: And thus the B-52's flying in the face of China's "orders" against military planes, and next a couple of carrier groups filling the skies with fighters and the waters with ships including nuclear powered stealth subs if needed.

Edited November 28, 2013 by NeverSure

[Loptr]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

[NeverSure]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

[Loptr]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Granted...but treasury bonds are just IOUs.

A limited war with China might be the perfect opportunity for America to default.

Now...that's food for thought.

Yes, you are correct, but the US could not selectively default on bonds held by the Chinese.

You are also overlooking the $3.6 trillion USD the Chinese currently hold in their foreign exchange reserves. More than enough to tip over the US economy if dumped on the FX exchanges.There is evidence that the Chinese have been hedging their USD positions with gold for some time. If the USD tanks, they will make it back as gold will go parabolic.

It has been well documented that the BRICS countries are moving away from the US controlled monetary system and the petrodollar is in jeopardy. Any further aggressive military posturing by the US will only speed the process along.

[Loptr]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

Read the latest Chinese posture on foreign investment released last week.

http://www.activistpost.com/2013/11/china-announces-that-it-is-going-to.html

Your position is bases on today's paradigm, which is changing. The world is not going to continue to accept USD's as a reserve currency even as a trading mechanism for very long as their reserves are being debased by $85+ billion per month. Read my comment in my previous post.

[harrry]

And to those in another thread who said the US wouldn't do any thing for Japan...

Hmm... Ran some B52's through there without permission huh? No one lays a glove on Japan or S. Korea or The Philippines or Australia, NZ.... Not so sure about Thailand which likes China. It can keep China.

China perceives Obama as weak and is testing him. The US simply can't, if only for economic reasons, let Japan down.

Not so sure about NZ they are not the most popular with the US. Remember when the US tore up the ANZUS treaty and now all the fuss that NZ isa making about a little internet firm that the courts are insisting on at least having full hearings to extradite and being rather strange about sticking to New Zealand laws in investigating it.

[PeterSmiles]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

Excuse my ignorance, but if China has a 272 Billion $ trade surplus with the US, I would assume that they get enough dollars to trade without the need to buy any US bonds.

[impulse]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Nope. They both have each other by the short and curlies.

Most folks don’t understand how the Chinese government got all their USD.

In order to do an export business, a Chinese company has to go through a laborious process to get an export license.

When that licensed Chinese company exports products, the amount of the commercial invoice has to be matched up to an incoming transfer of hard currency within a given timeframe. If there is no incoming hard currency transfer, the exporting company loses the benefit of a VAT refund for exported goods. If it happens too often, the company’s export license can be revoked.

The export company does not get to see the hard currency. The banks (Gov’t owned) keep the hard currency, and print up some RMB to trade to the export company, at the tightly controlled exchange rate. That’s the source of the Chinese government’s foreign reserves. They don’t go out into the market to buy USD, Euro or Pounds. They get them every time there is an export sale. As long as they have a trade surplus, they keep more than they have to send back out.

They use some of their foreign currency to buy the stuff they need in venues that don’t accept RMB, and the rest has to be parked somewhere. Since the banks are gov’t owned, it makes no sense for them to park the foreign currency in the banks, and pay themselves interest on it. They can’t loan it out in China, because it’s illegal to do transactions in Dollars, Euros and Pounds in China.

So they go out and get the best return they can in the international marketplace. That’s why they buy US debt- it offers a safe return.

So yes, China has a big trade surplus with the USA. They buy what they need with some of the USD, leaving them with a bunch of nasty foreign money they need to park somewhere. There’s very few safe places to park a few trillion dollars with any return at all, so they’re stuck buying US debt.

And they’ll be stuck buying US debt until they free up their currency for international trade. And for them, that will require giving up too much control of their fate.

The US gov't happily increases debt to keep taxes low so the people have more money to buy more stuff from China. And the pols get reelected because everyone has more stuff.

Edited November 29, 2013 by impulse

[NeverSure]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

Read the latest Chinese posture on foreign investment released last week.

http://www.activistpost.com/2013/11/china-announces-that-it-is-going-to.html

Your position is bases on today's paradigm, which is changing. The world is not going to continue to accept USD's as a reserve currency even as a trading mechanism for very long as their reserves are being debased by $85+ billion per month. Read my comment in my previous post.

That article is barely worth a comment. China is broke. It spends the dollars it gets except for what it needs for reserves so it can buy what it needs.

The guy misses the major point, as do a lot of people for some reason. The US government isn't directly connected to private business. The US government can be screwing up while huge US corporations go global and rake in the money and get richer and richer, as they are.

China is communist and controls the means of production. Its government has little to no private sector supporting it. As goes business, so goes the government. China has to feed its people. Americans feed themselves from their own private land, worked for private profit and competition. China imports food and the US exports it.

So any time you try to compare the US or any Western country with any communist country, you can't just make blanket statements. China has 1.3 billion mouths to feed and as communists, that's their job.

Without US corporations having things manufactured in China, China is finished. There are many other emerging countries to switch to, and the US is getting its own manufacturing more and more efficient. Most brands of Japanese and German cars are manufactured in the US for the US market. The crap China makes doesn't meet US safety standards and is crap.

The US private sector is thriving and wealthy, going global, owns technology, and China has no clue how to do any of that. China lives off of providing cheap labor to manufacture what others own and invent.

China doesn't amount to crap and won't in your lifetime.

[NeverSure]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

Excuse my ignorance, but if China has a 272 Billion $ trade surplus with the US, I would assume that they get enough dollars to trade without the need to buy any US bonds.

The error there is that China needs all of that money it takes in to pay its bills and service debt. Despite some peoples' belief that China is loaded with money, China is dangerously in debt and on the verge of collapse.

As posted above, China is a hollow shell without its exports to the USA.

"Has China’s Debt Crisis Moment Arrived?"

"The news on the China debt front is getting kind of scary.

Just weeks before a much-anticipated audit of local governments’ mounting debt levels, we learn from our team in Shanghai that local authorities have been allowed to roll over that debt with short-term borrowings and from Bloomberg News that banks have tripled their bad debt write-offs to cover losses in the sector.

Local government debt is where the rubber meets the road for the Chinese government’s big economic-policy dilemma. It’s no secret that Beijing wants to wean the economy off a risky investment-led growth model, in part to defuse a dangerous, speculative property bubble, but the rapid run-up in poorly monitored local debt stands in the way of a smooth transition to more stable, consumer-led growth."

Wall Street Journal

Edited November 29, 2013 by NeverSure

[Publicus]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Nope. They both have each other by the short and curlies.

Most folks don’t understand how the Chinese government got all their USD.

In order to do an export business, a Chinese company has to go through a laborious process to get an export license.

When that licensed Chinese company exports products, the amount of the commercial invoice has to be matched up to an incoming transfer of hard currency within a given timeframe. If there is no incoming hard currency transfer, the exporting company loses the benefit of a VAT refund for exported goods. If it happens too often, the company’s export license can be revoked.

The export company does not get to see the hard currency. The banks (Gov’t owned) keep the hard currency, and print up some RMB to trade to the export company, at the tightly controlled exchange rate. That’s the source of the Chinese government’s foreign reserves. They don’t go out into the market to buy USD, Euro or Pounds. They get them every time there is an export sale. As long as they have a trade surplus, they keep more than they have to send back out.

They use some of their foreign currency to buy the stuff they need in venues that don’t accept RMB, and the rest has to be parked somewhere. Since the banks are gov’t owned, it makes no sense for them to park the foreign currency in the banks, and pay themselves interest on it. They can’t loan it out in China, because it’s illegal to do transactions in Dollars, Euros and Pounds in China.

So they go out and get the best return they can in the international marketplace. That’s why they buy US debt- it offers a safe return.

So yes, China has a big trade surplus with the USA. They buy what they need with some of the USD, leaving them with a bunch of nasty foreign money they need to park somewhere. There’s very few safe places to park a few trillion dollars with any return at all, so they’re stuck buying US debt.

And they’ll be stuck buying US debt until they free up their currency for international trade. And for them, that will require giving up too much control of their fate.

The US gov't happily increases debt to keep taxes low so the people have more money to buy more stuff from China. And the pols get reelected because everyone has more stuff.

Thanks for saving me a lot of time and trouble trying to point out the entire predicate of how the CCP gets its US cash dollars, i.e., domestically from exporters rather than by going out on the market to purchase them.

Either you're well read or real world experienced, but I'll take either because it's so refreshing to find someone who knows the realities and can lay them out so plainly and clearly.

I'm terminally bored by the huge number of people who are certain the CCP owns the United States, or can cash out the United States. They don't know the first thing about the whole of the intricate and interconnected web or the nature of it.

So at this point I'd add but two important additional factors.

One is that the CCP knows it can't just sell off US$ either willy-nilly or as a part of a carefully calculated design that would include a timeframe.

The more US$ the CCP would sell, the more the RMB would increase in value, strengthen. Among other direct consequences, the more the RMB strengthens, the bigger the hit to PRC exports.

The export sector is largely privately owned, so they can't keep people employed doing nothing, as the state owned corporations do, nor does the sector get state subsidies. The bottom line then is that a significant decrease of exports puts people out of work with no social safety net except to return to the countryside which is out of the question for them.

And a CCP that is selling off US$ is also a CCP watching a proportionate increase of domestic inflation. Sell off USD $600 billion today Saturday and see inflation at 35% to 40% by Wednesday. So Thursday they're gonna want to sell off another $500 billion? Not on their life (or between Saturday and Thursday). The Boyz in Beijing know this - they're morons but they're not completely stupid.

So between export based manufacturing and throw in construction workers/companies (raw material imports) a quarter of the labor force is out of work, which, as you and many others well recognize is called a depression.

There's a lot more.

However, my second point is that privately owned banks in the US and the UK have various degrees of ownership of most of the state owned banks of the CCP-PRC.

The hugely money making machine of the China Construction Bank is a prime example. Bank of America owns 19.9% of CCB. That's because the legal limit of foreign ownership of a bank is 20%. We're nonetheless talking big billions of bucks here - US$ value.

But we're just getting started. HSBC, the UK based bank, owns 19.9% of CCB. Remember that the legal limit for one foreign corporation in one bank is 20%. So along comes the Bank of Communications, which is owned by HSBC, to buy up another 19.9% of CCB.

Which brings us to perhaps the irony or ironies that the China Construction Bank is owned to almost 60% by foreign banks - three of 'em. Well, actually, two, as HSBC and its subsidiary own almost 40% with the balance going to BoA. (That helped me tremendously while I wuz there because as a BoA customer from back in the States I could access my BoA account at any CCB location.)

What, the CCP in Beijing didn't catch that, about BoA, CCB, HSBC, BoC? The CCP in Beijing set it up. The reason being the CCP globally needs one reputable bank in the CCP-PRC. So the CCP cut a deal with BoA and HSBC together to bring CCB up to world standards in banking. That meant of course the CCP gave the two banks authority to clear out of the CCB the political hacks, the party loyalists, the incompetent, the vile, the lame and lazy, the leeches and parasites, to create a real bank with professional systems and personnel.

Still Goldman Sachs owns its share of the corrupt Bank of China, as does CitiBank. JP Morgan and others have ownership of the giant ICBC and other state owned banks. Offhand I'm thinking more of banks in the USA than in the UK, but the UK banks are in there too. The Boyz in Beijing much prefer to do legit business with the USA and the UK than anywhere else.

There's an old saying from the days of Adam Smith, that if you owe your banker 1000 pounds you have a problem, but that if you owe your banker 1 million pounds then he has a problem.

Edited November 29, 2013 by Publicus

[Publicus]

China holds the upper hand over the US in any diplomatic issues in Asia. Let's not forget who is the creditor and who is the debtor in this scenario.

Geez. Do you live on the moon?

China has purchased US bonds because every international player including Thailand must hold US dollars to engage in international trade. They can't buy or sell squat with their own currency. China didn't buy the US bonds because they have surplus money, they bought them to do trade. China is up to it's ass in debt.

The US is by far (by double) the world's largest economy and the USD is the international unit of trade.

The US has China by the balls because China's exports and therefore economy would collapse overnight if the US cut off China's imports.

China Is 175.6% Dependent on the U.S.

"The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase. (emphasis mine)

Forbes

Money talks. China won't be starting any war with the US anytime soon. Also, they don't want all of their hardware on the bottom of the ocean.

Read the latest Chinese posture on foreign investment released last week.

http://www.activistpost.com/2013/11/china-announces-that-it-is-going-to.html

Your position is bases on today's paradigm, which is changing. The world is not going to continue to accept USD's as a reserve currency even as a trading mechanism for very long as their reserves are being debased by $85+ billion per month. Read my comment in my previous post.

There isn't any remotely serious discussion by serious people of the RMB becoming a or the global currency. This is primarily because the RMB is used by the CCP as if it were monopoly money.

For one thing the CCP-PRC has a globally unprecedented property market bubble which in Beijing alone is $24 trillion dollars. There's a huge credit bubble in the above ground state owned banking system and another unmeasured bubble in the underground shadow banking system. Runaway local government debt equals 40% of GDP.

People throughout this year are taking loans to pay off overdue loans. Exports are increasing when they should be decreasing because the Boyz in Beijing need to but cannot retool the economy away from exports and redundant and wasteful unproductive infrastructure to favor domestic consumption.

The CCP's economy is on a straight line to a crash. Its model of state corporate industrial monopoly capitalism with some private enterprise, governed by a censoring and punishing dictatorship is already recognized globally as a failure. Moreover, it's either suspected or recognized that the CCP long ago lost its ability to reform and devise new and radical ideas, such as the economic opening of Deng Xiaopeng.

It is rare to find anyone who has any confidence in the political economy of the CCP-PRC or in the RMB as a viable currency in the PRChina, much less as a global currency.

So there are people who still need to learn to separate what they wish for from reality.