China’s New Weapon

My imagination runs amok while wondering how China’s New Weapon could prove useful to China…

China to the US: “We regret to tell you that we have been disappointed about your decision regarding issue X. (Selling new arms to Taiwan? Supporting a Taiwanese declaration of independence? Increasing pressure on N. Korea beyond what China wants? Providing public support for a Chinese pro-democracy movement? Supporting a move by the Philippines to begin drilling for oil in the Spratly Islands? The possibilities are numerous.) We find ourselves in the awkward position of pointing out to you that your decision poses great problems for us. We would like to urge you to reconsider your decision.”

The US to China: “No.”

China to the US: “Ah. We understand, and if there is nothing that we can do to change your mind, we will respect your decision.”

“By the way, on an unrelated matter and in the spirit of friendship and international cooperation, we thought we should let you know that our central bank has recently told us that its economists recommend a reallocation of its rather large investment portfolio. Unfortunately, the portfolio managers inside the PBOC tell us that this will involve selling very large quantities of our US Treasury securities. Furthermore, they tell us that due to some internal bureaucratic restrictions, those sales will have to happen in several large blocks of roughly $50 billion at a time, over the course of just two or three days. We in the Foreign Ministry hope to be able to change their mind about this, but I fear that our influence may be insufficient to prevent these actions by the central bank. We hope that this will not cause you too much of an inconvenience.”

The US to China: “Hmm.” Pause. “Thank you for telling us.”

“You know, we haven’t actually made any final decisions about issue X. We’re still considering all sides of the issue. Our guiding principle regarding issue X has always been flexibility.”

China to the US: “We are so glad to hear that, and we knew that you would agree with us that our mutually beneficial relationship is far too important to jeapordize over such a trivial matter as issue X. We also agree with you that nothing is more important than flexibility in today’s modern world, with all of its complicated financial and political relationships. We know you will be sensitive to the impact that your decisions about issue X will have on China. And we will do everything in our power to urge our central bank to be just as sensitive to your needs as you are to ours. We should also note that it will apparently still be a little while before our central bank makes any final decisions about its portfolio allocations. I’m certain that issue X will be resolved to our mutual satisfaction before that time.”

“Please keep in touch, and have a nice day.”