Wednesday, October 12, 2011

China issues virtual trade war after Senate passes currency manipulation sanctions

It did not take long... perhaps 5 minutes for China to move to economic Defcon 2 and issue a reponse to the Senate's vote to sanction China regarding their currency manipulation.  In a letter from China's Ministry of Commerce, the second largest economy in the world told the US in a veiled threat...

You want a trade war... you got it.

From the Chinese Ministry of Commerce

On October 11, the U.S. Senate passed the "2011 Oversight Reform Act of currency exchange rate," Shen Danyang, a spokesman for the Ministry of Commerce has issued a statement that the recovery in the global economy facing a severe test of the critical moment, the U.S. Senate to force through legislation to promote trade partner currencies, is tantamount to upgrading the wrong signal on protectionism. This is a serious violation of international rules, and not only threatens the stable development of Sino-US economic and trade relations, but also with other countries to jointly cope with challenges, runs counter to efforts to oppose trade protectionism, China is firmly opposed.

Shen Danyang stressed that China has always maintained need for the two sides to strengthen communication, and to take common positive measures to develop Sino-US economic and trade cooperation. Once the motion is formally made into law, it will inevitably lead to serious damage to China-US economic and trade relations. China hopes that the U.S. after a rational and objective treatment of the exchange rate, makes the right choice.

In essence, the US, which cannot even deal with its own debt crisis, unemployment, and economic stagflation, had done what most ignorant entities do when they have no answers... blame someone else.

What is that old saying... the debtor is slave to the lender?  Insulting and threatening the owner of a large portion of your debt is probably not the best thing to do.  The Senate better hope China does not decide to dump that debt... over $2 Trillion worth, and just for the heck of it, throw out a tarrif on imports or two.


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