29-12-2004 00:57									#1
	Who would be hurt more in a US-China ECONOMIC confrontation over Taiwan? Browse Apolyton AD-FREE

Lets assume that China, concerned about the steady development of a distinct Taiwan identity, attacks Taiwan (presumably via air and missile attack, and naval blockade) Assume there is no declaration of independence as provocation.


Assume further that the US does NOT go to war, but responds by embargoing all trade with China. Assume China responds by selling off all its assets in the US.

What are the economic and political consequences in A. The US B. China C. elsewhere ?

	29-12-2004 00:58									#2
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Taiwan

	29-12-2004 01:06									#3
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Both states would be hurt, as would everyone else.

I will add that your hypothetical is nonsense as well, but that is another issue.

	29-12-2004 01:07									#4
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OK, te be serious, long term consequences would IMO more serious for the US, since China is probably THE place for making money in the next decades, and that chance would be lost for US companies for a long time. But then I can't say that I'm an expert in economical questions

	29-12-2004 01:09									#5
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quote: Originally posted by GePap Both states would be hurt, as would everyone else. I will add that your hypothetical is nonsense as well, but that is another issue.

a hypothetical is by, definition, a hypothetical, not an assertion that the scenario is likely. Its an attempt to do a thought experiment, not a projection of what is likely to happen. It can nonetheless be illuminating.

	29-12-2004 01:10									#6
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I think both would be hurt, but (maybe) China moreso.

All it would mean for the US is that stuff at Walmart (one of China's biggest importers) would be a bit more expensive... but at the same time it would cause a boon for US and Canadian manufacturing now that they don't have to compete with China.

	29-12-2004 01:19									#7
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Both sides would be greatly hurt, there'd be skyrocketing prices in the USA and massive job losses/production in China. I would have to say the PRC government would be hurt more though- the USA is stable enough that the system could withstand an economic crisis. An economic catastrophe in China however might lead to severe unrest in China.

The rest of the world is also hurt by the plummeting value of the dollar from China selling off it's US assets.

	29-12-2004 08:52									#8
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I say we seize their friggin' assets.

The Chinese economy would tank without us, their largest customer.

	29-12-2004 10:15									#9
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Perhaps it is Castro, perhaps it is not. But look at Cuba to see what a happens if you take on Uncle Sam in a trade war.

	29-12-2004 10:43									#10
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quote: Originally posted by Zkribbler I say we seize their friggin' assets. The Chinese economy would tank without us, their largest customer.

But without the Chinese to finance your deficits you would have to raise taxation and interest rates to compensate.


That said Shi Huangdi's assertion is correct, the political system in the US is more able to withstand an economic downturn.
That might not be a good thing however - the system in china might end up being replaced, but it could easily be replaced by rampant nationalism which would be far worse for the US (and everyone else) than the current regime.

	29-12-2004 10:49									#11
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quote: Originally posted by Zkribbler I say we seize their friggin' assets. The Chinese economy would tank without us, their largest customer.

And if China dumps their dollars, we're burnt toast.

	29-12-2004 10:55									#12
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Thread Summary:

The US.
China.

	29-12-2004 10:55									#13
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Che:

quote: I say we seize their friggin' assets.

	29-12-2004 11:02									#14
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China is the largest external-holder of dollars in the world (maybe #2 after Japan). If they dump our dollars, everyone else will try and dump theirs so as not to be left holding the bag. Then we go into hyper-inflation as our currency tanks. Even if we seize their American holdings, it ain't gonna save our ass-ets.

	29-12-2004 11:02									#15
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Even if the assets are siezed it still means that a large chunk of the financing for your deficits will stop (as the chinese will no longer be buying new assets) - which will again mean that the US has to have a combination of higher interest rates and taxes.

	29-12-2004 11:18									#16
	Re: Who would be hurt more in a US-China ECONOMIC confrontation over Taiwan? Support Apolyton buy from Amazon

quote: Originally posted by lord of the mark Lets assume that China, concerned about the steady development of a distinct Taiwan identity, attacks Taiwan (presumably via air and missile attack, and naval blockade) Assume there is no declaration of independence as provocation. Assume further that the US does NOT go to war, but responds by embargoing all trade with China. Assume China responds by selling off all its assets in the US. What are the economic and political consequences in A. The US B. China C. elsewhere ?

The US would likely seize all chinese assets in the US rather than allow the Chinese government to sell them off.

	29-12-2004 11:18									#17
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quote: Originally posted by chegitz guevara China is the largest external-holder of dollars in the world (maybe #2 after Japan). If they dump our dollars, everyone else will try and dump theirs so as not to be left holding the bag. Then we go into hyper-inflation as our currency tanks. Even if we seize their American holdings, it ain't gonna save our ass-ets.

Their dollars are in the form of Treasury bonds, aren't they? Couldn't we just default on them?

	29-12-2004 11:42									#18
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quote: Originally posted by Kuciwalker Their dollars are in the form of Treasury bonds, aren't they? Couldn't we just default on them?

The end result would be the same. A massive devaluation of the U.S. dollar as our other creditors demanded higher interest rates on our debts, resulting in hyper-inflation, Defaulting on debts is very bad. I would guess, the only way would could get away with it is a DoW on China over Taiwan, and maybe not even then.

	29-12-2004 11:49									#19
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To cause problems for the US economy, China and Japan don't need to sell off their assets - they just need to stop buying more

	29-12-2004 12:36									#20
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While it might hurt the US, it would destroy the Chinese economy. About 30% of all Chinese exports are currently sent to the US. Almost all of these can't be simply sold elsewhere. As far as the US is concerned, places like India and other third world countries can provide the cheap labor to make lowend goods, so it would only be a temperary price increase. China would actually be hurt at the same time by the economic implications of the blockade, since Taiwan would be presumably lobbing anti-shipping missiles at any ship trying to cross through the strait, thereby impairly the transport by sea of goods to and from China. This is all on top of limitations to fishing boats in the area. If this lasted for any amount of time, you'd be looking at extremely massive layoffs across China and factories relying on US exports close or heavily cut back on staff. Its questionable whether China's government could survive the chaos as the number of newly unemployed and familiy members of the unemployed individual climb into the 100s of millions.

Japan certainly wouldn't be on China's side in this. In fact, with their general pro-Taiwan inclination, they might agree to at least limited sanctions against China in this scenario. (There actually would be a great deal of anger in Japan about the indirect damage to Japan's economy caused by a Chinese blockade of Taiwan due to the cutting off of traditional shipping lanes.)

	29-12-2004 13:04									#21
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Don't be too sure that Japan would impose an embargo on China - it's been China's demand that has lifted Japan out of it's slump in the last two years.

Also whilst Taiwan might try to counter-blockade China's ports, the two major ports of China (Hong Kong and Shanghai) lie a long way north and south of the Taiwan Straits.


You are also making a grave error by assuming that "places like India and other third world countries can provide the cheap labor to make lowend goods" - whilst they can the US still needs to be able to buy them, with China no longer helping to finance US spending which is 106% of it's income demand in the US would have to fall.

	29-12-2004 13:05									#22
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quote: China is the largest external-holder of dollars in the world (maybe #2 after Japan).

#2 behind Japan by a pretty large margin.

	29-12-2004 13:07									#23
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I think that both would suffer greatly and the whole world would also go down with it.

	29-12-2004 13:11									#24
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Who is the biggest supplier of food to China?

	29-12-2004 13:17									#25
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quote: Originally posted by Mordoch While it might hurt the US, it would destroy the Chinese economy. About 30% of all Chinese exports are currently sent to the US. Almost all of these can't be simply sold elsewhere.

If the US suddenly has a huge shortfall in goods, you are going to have problems.

quote: Originally posted by Mordoch As far as the US is concerned, places like India and other third world countries can provide the cheap labor to make lowend goods, so it would only be a temperary price increase.

Temporary is going to be serveral years at least. It takes time to build factories and stuff, and you are also looking at a massive infrastructure problem.

quote: Originally posted by Mordoch China would actually be hurt at the same time by the economic implications of the blockade, since Taiwan would be presumably lobbing anti-shipping missiles at any ship trying to cross through the strait, thereby impairly the transport by sea of goods to and from China.

What Taiwan?

quote: Originally posted by Mordoch Japan certainly wouldn't be on China's side in this. In fact, with their general pro-Taiwan inclination, they might agree to at least limited sanctions against China in this scenario.

Japan is not going to do anything, as long as the PRC keeps DPRK reined in.

	29-12-2004 13:18									#26
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quote: Originally posted by Ted Striker I think that both would suffer greatly and the whole world would also go down with it.

Yup, that's the most likely outcome.

	29-12-2004 13:29									#27
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The shipping industry in my city is the biggest in the US, and is expected to triple in the next 10 years, all of that due to trade with China.

The longshoremans' union strike last year shut down the entire west coast shipping lines and had a shock effect on the economy, I could only imagine that an economic confrontation would have a worse effect.

	29-12-2004 15:38									#28
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NYE,

All the Taiwanese mobo makers have most of the factories in China now and will continue the move.

	29-12-2004 18:11									#29
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There seems to be a lot of wishful thinking in these threads.

Gepap makes the simplest and best cases: everyone will be hurt.

The thing about China is that you really can't predict where it will be in 10 years. 10 years ago, they couldn't either. Having a fast growing economy is one thing, having a stable economy is something else entirely. One only needs to look at Japan. I already see a repeat of the concerns of Japanese economic and world dominance. China's economy is very delicate as most rapidly developing one's are. The government is watching it very carefully and doing what is necessary to prevent it from crashing and burning, like Japan, while worrying about the more unique factor that China has. If something big and deliberately harmful appeared, many countries would be affected, but it will be the stable economies that will survive through it. Until China stabilizes its economy, it is in no position to make economic threats and has wisely not even hinted so.

	29-12-2004 18:22									#30
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If China invaded Taiwan, the US would hardly be the only major western market closed to them.

However, I doubt that with such widespread economic devestation that the confrontation would remain cold for long.

Conventional warfare, probobly primarily naval/air, would break out and the China would definetly be the biggest loser by far.