RSS

China Threatens to Sell Dollars if US Pressure Does Not Abate

If the US continues pressing China to float its currency, Beijing will start selling its dollar reserves, warns Ambrose Evans Pritchard of the Telegraph . Although Chinese officials assert that “China does not want any undesirable phenomenon in the global financial order”, such action could trigger a dollar crash as well as a spike in US bond yields. The combined effect might well push the US, and the global economy, into a recession.

The tension between Beijing and Washington intensified after the drafting of a senate bill proposing trade tariffs in retaliation for Chinese “currency manipulation”. Henry Paulson, US Treasury Secretary, warned that any such action could “trigger a global cycle of protectionist legislation.”