Foreign Currency – China Threatens the US Dollar

It's been reported that China is sitting on a massive foreign currency reserve. The country has been accused of using its foreign currency reserve to keep its economy stable and strong. But recent news reports have expressed concerns that Beijing has begun a campaign of economic threats against America. The threat is it will liquidate its foreign currency reserves, including its massive holding of US Treasury bonds if the American government imposes trade sanctions on China. America is keen to introduce sanctions to force a ‘yuan revolution'.

US Dollar under Threat

Chinese officials have warned that they will use Beijing's £658bn of foreign currency reserves as a political weapon as a reaction to pressure from Washington. If they do use their foreign currency reserves, it could trigger a massive dollar crash. At the moment the US dollar is already suffering. The States is suffering due to the sub-prime housing market that has triggered a massive recession and a wave of house repossessions.

Beijing
's Foreign Currency Reserves – A Bargaining Chip

The impact of using Beijing's foreign currency reserves against the States is considered to be so extreme it's been dubbed as "China's nuclear option". There are fears it could induce an American recession. The fears were triggered after one of China's leading financial figures said that Beijing's foreign currency reserves could be used as a ‘bargaining chip' against the US.

Huge Foreign Currency Reserves

Beijing has a massive amount of foreign currency reserves in the shape of US dollars and there's no doubt it has the power to trigger off a dollar collapse. In America, presidential hopeful Hilary Clinton has incorporated the threat from Beijing into her election campaign, she was quoted as saying legislation should be in place to stop America being held hostage to economic decisions in China.

Economic and Political Threat

The comments made by Beijing about its US dollar foreign currency reserves have been taken seriously as a ‘clear political threat'.

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