China's Games

While Victor Cha wonders in his op ed piece about the Olympics "Countdown in Beijing, The Choice for China: Propaganda or Positive Change?" (WaPo) .... others are worrying about the unsporting China.

Cha asks, "Will the 2008 Games be like the 1936 Games in Berlin, where the goal was to validate a flawed domestic system before the world? Or, in the coming year, will we see whether Beijing is ready to mark the Games as a watershed for China's constructive role in the community of nations?"

Contrast this Quixotic view with this headline today in the United Kingdom's Telegraph.... "China threatens 'nuclear option' of dollar sales."

"The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of U.S. treasuries if Washington imposes trade sanctions to force a yuan revaluation."

The warning that Beijing may use it's $1.33 trillion of foreign reserves to blackmail our government, or worse, is described as China's "nuclear option." It could trigger a "dollar crash at a time when the U.S. currency is already breaking down through historic support levels."

Such an action would cause a spike in U.S. bond yields, "hammering the U.S. housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900 billion in a mix of US bonds."

In other words, China is financing the Bush administration's much touted "booming economy," and if we don't dance to their tune....

It's hard to know just how far China will go to eclipse America and secure their coveted place as a world power, but they're certainly making the moves to "let the games begin."