ONTD Political

Beijing hints at bond attack on Japan

6:25 pm - 09/19/2012
Beijing hints at bond attack on Japan
A senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea.

Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.

Writing in the Communist Party newspaper China Daily, Mr Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive.

Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry.

The warnings came as anti-Japanese protests spread to 85 cities across China, forcing Japanese companies to shutter factories and suspend operations.

Fitch Ratings threatened to downgrade a clutch of Japanese exporters if the clash drags on. It warned that Nissan is heavily at risk with 26pc of its global car sales in China, followed by Honda with 20pc. Sharp and Panasonic both have major exposure. Japan’s exports to China were $74bn in the first half of this year. Bilateral trade reached $345bn last year.

Mr Jin said China can afford to sacrifice its “low-value-added” exports to Japan at a small cost. By contrast, Japan relies on Chinese demand to keep its economy afloat and stave off “irreversible” decline.

“It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much,” he said. It is unclear whether he was speaking with the full backing of the Politburo or whether sales of Japanese debt would do much damage. The Bank of Japan could counter the move with bond purchases. Any weakening of the yen would be welcome.

A recent study by the US Defence Department concluded that a Chinese firesale of US debt was not a serious threat.

The US defence secretary, Leon Panetta, was in Beijing on Tuesday to try to stem the political crisis, calling for restraint on both sides.

He warned earlier that “provocations” over the islands could spiral out of control and lead to conflict.

Mr Panetta said the US is neutral but this is a hard balancing act, given the US nuclear umbrella for Japan and its use of military bases on Japanese soil as an “unsinkable aircraft carrier”. The ambiguity of the US role was glaring after a deal with Tokyo on Monday to build a new anti-missile radar shield – ostensibly against North Korea.

Diplomats say China is calibrating the crisis to probe the strength of US ties with Japan, knowing that alliance fatigue in Washington and the clumsy handling of the dispute by Tokyo has created a rare opportunity.

The Obama administration must navigate a delicate course. A tough line against China risks putting the world’s two superpowers on a collision course: a soft line risks setting off alarm bells in Japan and pushing the country towards rearmament.

Christian Le Miere from the International Institute for Strategic Studies said the crisis had become dangerous, citing Mao Zedong’s aphorism from 1930 that “a single spark can start a prairie fire”.

He said the region is “rife with historical enmity and chauvinism”, encouraged by Tokyo’s “seeming lack of contrition for wartime atrocities” and China’s own well-nurtured narrative of humiliation by foreigners.

China’s post-Maoist regime derives its legitimacy from nationalism, especially now that the boom is fading and China is losing some of its competitive edge.

The anti-Japanese fervour was systematically stoked by the “Patriotic Education Campaign” of Jiang Zemin in the 1990s to divert attention from party corruption and the growing gap between rich and poor.

But it is a double-edged sword for China’s leaders. “Given its potency, it is difficult to control. Nationalism can turn against the government, if it is perceived as doing too little,” he said.


Markets are already starting to price in an arms race in Asia. Shares of China’s North Navigation Control Technology, which makes missile systems, have jumped 30pc in recent days.

China is becoming self-sufficient in defence. It was the world’s biggest net importer of weapons six years ago. It fell to fourth place last year.

Japan is at the other extreme. An official report this year – “A Strategy for Survival” – said Japan’s spending on its “Self-Defence Force” had shrunk by 4pc in 10 years. It called for “urgent” action to rebuild the country’s military.

If there is any silver lining in an Asian arms race, it may at least soak up the region’s excess savings and pull the world out of semi-slump. But be careful what you wish for.</a>

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This would be all kinds of NOT GOOD if China did it - one blog post I read on this said that if China did do this to try and economically cripple Japan, Japan could turn around and sell off all the US bonds it held in an attempt to halt the damage (and to force the US to intervene), which would pretty much trigger a collapse of the US economy.

Tensions are really starting to ride high - there have been all those anti-Japanese demos in China (including the US Ambassador's car getting attacked and protesters attacking police in Shanghai) and today, there was a fire set at the gate to a Chinese school in Kobe.
sweetveg 19th-Sep-2012 11:30 am (UTC)
i hope they are able to reach an amicable decision but i highly doubt they will be able to since they have been feuding over the island for quite some time now...
hinoema 19th-Sep-2012 12:23 pm (UTC)
Beijing hints at bond attack on Japan

A senior advisor to the Chinese government...

Writing in the Communist Party newspaper China Daily...

Separately, the Hong Kong Economic Journal reported...


Firstly, I think the article is reaching somewhat- one advisor and a journalist hardly constitute 'Beijing'. Secondly, if it's in the papers like this, it feels more like saber rattling and PR to me, meant to spook others into pressuring Japan to not agitate China.

I really don't think China can afford to lose either Japan or the US as consumer markets, and especially not both.

The protests this month have come as economic growth in China moderated in the second quarter to the slowest pace in three years.

http://www.businessweek.com/news/2012-09-17/china-japan-dispute-over-islands-risks-340-billion-trade#p2

Edited at 2012-09-19 12:27 pm (UTC)
lickbrains 19th-Sep-2012 07:20 pm (UTC)
My thoughts exactly.
dorkiilove 19th-Sep-2012 01:53 pm (UTC)
I call bluff. Unless Chinese officials are truly stupid enough to do this. Sure China can try and cut off Japan's supply of precious minerals, but to say they're not going to retaliate is ridiculous. All those huge Japanese conglomerates with thousands of factories in China employing /chinese/ people? They can all kiss goodbye to their jobs. There's nothing like job less and a unhappy citizen population to put things into perspective.


Speaking of that thing you read, if Japan really did mass sell their bonds and the U.S economy crashes, than China is fucked too. Chain reaction tbh!
dorkiilove OFF TOPIC19th-Sep-2012 01:56 pm (UTC)
random but for some reason it irritates me so much when people complain about outsourcing factory jobs to China. People don't want to pay an extra 3 dollars (or idk however much) for something manufactured in the US over something manufactured in China, but yet theres nothing more that people love than minimum wage. Something has got to give thou....

rant of the day done
georgeslymaniv Re: OFF TOPIC19th-Sep-2012 02:42 pm (UTC)
What irritates me about those people is that they try to blame the Chinese workers, "OMG they're stealing our jerbs!1! Their products are crap!1!!" Like that has anything to do with the worker. Companies choose to move the jobs over. The companies are the ones who instituted cutting corners. The workers are just taking whatever jobs they can get.
dorkiilove Re: OFF TOPIC19th-Sep-2012 02:49 pm (UTC)
lol yes! consumers are to blame too. these people who get up and preach on television are just as fault as the rest of us.

When we go to the market and actively choose to buy that $4 plastic tube made in China instead of that $8 dollar tube made in the U.S, it does sound a very loud and clear message.
mirhanda 19th-Sep-2012 04:55 pm (UTC)
Some of us definitely look for goods made in the U.S. (and other Western countries with good pay and benefits, I'll buy Australian imports, for example). I think we should pressure the government to intervene and put tariffs on goods imported from countries with no labor protections so that it no longer behooves a greedy company to move overseas. We need those jobs back here in the U.S.

Edited at 2012-09-19 04:57 pm (UTC)
kagehikario 19th-Sep-2012 07:15 pm (UTC)
But Free* Trade!!!1!!1!

*(disclaimer: Trade only free of interference in profitability of US corporations)
lickbrains Re: OFF TOPIC19th-Sep-2012 07:18 pm (UTC)
Yes, this.

Another thing that bothers me is that people don't understand that even if the tag says "Made in US", it doesn't mean it was sweatshop-free. I have a lot of ambivalent feels about sweatshops 'cause I have family working in some but they need those jobs to be able to stay in America with their kids. But I hate sweatshops because of the conditions and shit. Then again, how many people are gonna hire a non-English speaking immigrant with no credentials in white America?

Again, ambivalent feels. Wish it were easier but, with the way big businesses currently work, it won't be for a long time.
dkwrkm 19th-Sep-2012 04:00 pm (UTC)
Agreed with some of the other comments that this article is reaching.

They've had this dispute for so long, I'm surprised it's blowing up now of all times.
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