Who would be hurt more in a US-China ECONOMIC confrontation over Taiwan?

[KrazyHorse]

Re: Who would be hurt more in a US-China ECONOMIC confrontation over Taiwan?

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.

[Kuciwalker]

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?

[chequita guevara]

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.

[el freako]

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

[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. 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.)

[el freako]

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.

[Drake Tungsten]

China is the largest external-holder of dollars in the world (maybe #2 after Japan).

#2 behind Japan by a pretty large margin.

[Ted Striker]

I think that both would suffer greatly and the whole world would also go down with it.

[notyoueither]

Who is the biggest supplier of food to China?

[Urban Ranger]

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.

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.

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?

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.

[Urban Ranger]

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.

[Ted Striker]

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.

[Urban Ranger]

NYE,

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

[DaShi]

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.

[Patroklos]

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.