PRESIDENT George W Bush on Wednesday said China would be ‘foolhardy’ to push down the dollar in retaliation for the massive US pressure to revalue the Chinese currency upwards.
He was responding to the argument being put forward by Chinese Communist party academics, that if US pressure to revalue the Chinese currency becomes too great China could withdraw its many billions of dollars that it has used to buy debt, that is US Treasury Bonds, and buy gold instead, crashing the dollar and bankrupting the United States of America.
Bush retorted that if the Chinese were foolish enough to do this they would be hurt much more than the US capitalists.
The real issue however is that imperialism is now in such a deep economic and political crisis that its immediate economic future depends on keeping the Chinese Stalinists sweet, if the situation will allow this. China selling its US treasury bonds is now being called the ‘nuclear option’.
This is harking back to the ‘Mutually Assured Destruction’ theory that was at the strategic centre of the struggle between the US and Soviet Russia during the cold war, when both had enough nuclear bombs targeting each other to destroy the world many times over.
The idea was that neither would dare to do it, and the notion was then developed that this was how world peace could be kept indefinitely.
Bush’s assertion is that the Chinese Stalinists would be hurt even more than the US by carrying out this ‘nuclear option’, and therefore will not do it.
However, this is not a question about the character of the Chinese leaders. There are also the laws of the capitalist crisis to take account of.
The Chinese Stalinists have taken the capitalist road, and now describe China as one state with two social systems, run by the Communist Party that still exercises the dictatorship of the proletariat.
They want to have peaceful coexistence with the capitalists and are pleased with the way that they have used Special Economic Zones to bring US capitalism into China in a way that has weakened the US.
They are not revolutionaries and have not the slightest intention of bringing capitalism crashing down. However, having put almost a trillion dollars into US Treasury bonds they now must protect their investment. They know they are not in control of the rapidly developing worldwide crisis of capitalism, and are subject to its laws of development including its crisis.
Zhang Ming, an economist with the Chinese Academy of Social Sciences, said after Bush’s comments: ‘As long as there are no big upheavals in the American economy and there is no serious dispute between China and the United States, the Chinese government will not sell off US dollar assets in any major amounts.’
But of course there are some very big upheavals developing in the US economy.
He added that China would stand to lose, too, if the dollar plunged because an estimated two thirds of its 1.3-trillion-dollar foreign exchange reserves are tied up in US-dollar assets, mostly Treasury bonds.
In other words, to protect its dollar holdings China could be forced to begin selling them for gold.
The US knows that this is the case, despite the words of US Treasury Secretary Henry Paulson. He said that suggestions that China was considering selling off dollar denominated assets were ‘absurd.’
There is no way that China can avoid the laws of the capitalist crisis.
In the period ahead, the Chinese workers must over- throw the Stalinist bureaucracy as part of the advance of the world socialist revolution to smash world capitalism and imperialism, or else see the capitalist crisis destroy all the gains of the Chinese revolution, not just its dollar holdings.