The US trading war with China - Is China up for a financial crisis?
Donald Trump isn't the best friend with state leaders throughout the world, just like he might not be the biggest fan of the WHO either. But, recently his actions towards China have been given a lot of attention, especially after China decided not to keep their agreement with Hong Kong, dealing with how Hong Kong was to be kept autonomous and able to deal with things the way they wanted.
Hong Kong has always been an important ally for the United States, but as China is taking control over Hong Kong, an important ally is about to be lost. And this is painful for the USA, which has led to what is called the Hong Kong Autonomy Bill.
The Hong Kong Autonomy Bill
The United States has created a bill that says that sanctions should be made against those who have taken part in taking the freedom from Hong Kong. But, the sanctions are not only against the persons but against companies and institutions that have helped them or financed them in any way. In other words, if they start making sanctions against individuals, companies and institutions, many people will suffer.
How can the US cause trouble for banks in China?
Many important persons have bank accounts in the USA, or they own stocks or have money somehow connected to the US Dollar. Well, if the United States gets things to go the way they want it to, then they might freeze such funds or hinder the funds from being used.
This will have a brutal impact on trading in China (since most people are trading with the USD), and also on banks with liquidities and values in the USD. Even though the CNY is the currency of China, it cannot be trusted due to the rulers of the country able to manipulate the currency. That is why the USD is so frequently used and is so popular. And that is why the USA is able to "blackmail" China and other countries with the Dollar.
What can China do to protect themselves?
We have seen it in Russia earlier, and we can now also see it in China. The United States is using the Dollar to force through their will. But, it is for sure that Putin (in Russia) and Xi Jinping (in China) don't like it. And that is why they for sure work very hard to build their own systems and to get currencies up and running that are stable and that can be used (without involving the USD). But, those systems are not up and running yet.
Cryptocurrencies can be a solution for some people, after all, nobody can suddenly come and say that they freeze your funds. If you have the keys, you have the power. But, China has been speaking about creating their own digital currency for a long time, and something like this could for sure speed up the process. However, anything created by China for China can easily be manipulated, meaning that it needs to be very solid for people inside and outside China to actually trust it.
I am not that worried about China
It might seem brutal and in the video in the start of the article, they are hinting about a giant bank collapse in China. I don't believe the USA will actually sanction that much against China and institutions, companies, and individuals in the country. They might do few things, but I doubt that they will dare to take those giant steps (just like they didn't go crazy sanctioning Russians and Russians companies either).
It should also be said that China is a country able to take care of itself. I am worried about the local farmer and the people who might suffer and feel the consequences way more than the leaders of the country. But, to be honest, I was worried about them even before this happened. The lack of freedom, the lack of freedom of speech, the lack of freedom to believe whatever you want to, and so much more is already depriving the lives of the Chinese people. If the economy will be attacked as well, I fear that the poor will end up suffering the most, as they will pay the bill for the stupidity of their rulers.
For China as a big entity, I am sure that they will have solutions up for their banks and companies, should the USA actually start to sanction against banks and other entities in the country. It might be a digital currency or it might be something else.. but I am sure that China will come through it, and maybe even stronger on the other side as they will have to rely on themselves and not on the currency of some opponent that can suddenly use it against them.
China might become an example to the world
If the sanctions go through, China will be forced to stop using the US Dollar. They will have to find different solutions. And as they do, they will pave the way for other countries who would love to follow in their footsteps.
The United States and the Donald Trump administration has shown it over and over again that they are willing to take actions to force people to stop their actions (if the US government doesn't like it). It is almost like in a movie when you have a video containing some content the person in the video doesn't like. They will do anything in their power to keep the video a secret, and thus, they do anything the blackmailer requires.
The USD is such a tool that the USA can use against almost all countries of the world. But, if they keep blackmailing countries with this power, I am sure that more countries than just China and Russia will be looking for a way to get rid of this constant threat in their daily lives that the USA can decide to use against them at any time.
I am not an economist, but I have found this to be a very interesting topic. I will follow it carefully to see how it will end and what will happen.
Do you have any insights or thoughts on the topic? Do you think the USA will put sanctions into life and actually ban banks in China from using their USD funds (based in the USA?) Would it be right of the USA to go through with the sanctions?
This is only a small part of the big trading war between the USA and China that has been going on for months. Huawei has been totally banned in the USA, and that is only one little part of the battle. So, what do you think? How will this end?
I would love to read your insight and your thoughts on the subject!
This is an original article written by me for Project Hope!