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Comment by tenpies | Hacker News Reader

> China is also a huge foreign debt holder, and if presumably no longer a buyer due to decoupling, will send US interest rates skyrocketing.

Before that happens, the capital exodus demanding to liquidate their Yuan for USD would have burned through the country's USD reserves and they would be insolvent. This is quite similar to what happened in South Korea in 1997 and it took IMF intervention to stabilize the country. The PBOC could limit how much a person can sell, but this would crash their currency (e.g. Venezuela) almost instantly.

As much as people want to hate on Trump and/or the US, China is in a weaker position here. Don't get me wrong, both countries suffer, but only one of them would see its financial system collapse.

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> "...but only one of them would see its financial system collapse."

Unless that is an absolute certainty then and this is a game of high stakes chicken, then I would say the USA has more to lose.

While China has certainly developed in the last couple decades they are still relatively used to living with less. On the other hand, Ameicans lose their minds when Facebook goes down for an hour.

That is, there would be bedlam in the USA. China much less so.

America has free markets and a decentralized, bottom-up system that results in entrepreneurs and private entities deciding how to allocate capital. There may be temporary pain but wherever there is opportunity an entrepreneur will step in.

China has zombie enterprises, their financial statements are lies, and cities built by bureaucratic maneuvering over market need.

I will always bet on the American private sector over the government-run towers of lies.

And of course all the product you bought that were made in China are lies, they don't exist at all. And obviously America will be able to make these products despite having about 0 unemployment, but hey, magic happens here amiright?

> obviously America will be able to make these products

American entrepreneurship doesn't mean all the manufacturing would take place in America. Entrepreneurial people are already moving to build more manufacturing in other countries where labor is less expensive and more plentiful than America. I don't think anyone was arguing that America would manufacture everything they currently import from China.

Even if the companies laterally move overseas manufacturing to other Asian countries, the end result is still China losing economic control over the United States.

Can't those other countries start behaving like China? Sure, but doubtful it would go anywhere.

And this happened instantaneously with a wave of magic wand and no costs, right?

The cost to the USA would make the recent debt crisis look like a picnic.

There are lots of countries that are neither the US, China, or in Europe.

If China decides it doesn't want to trade with the US, there are plenty of places that will.

And honestly, China had already reached the limit of an export-based economy. Growing your national economy on labor arbitrage only works up to a certain level of per capita wealth.

Production is already moving to other places in SE Asia. Vietnam is one of the big winners. So I wouldn't worry too much. It would only make things more flexibile as moving production/capital out of a smaller country has less of an impact.

> And obviously America will be able to make these products despite having about 0 unemployment

That's what's called entrepreneurship. People will get rich making these products that are in sudden demand.

America’s cities are based on zoning laws designed to do racism in 1900, and the rest is based on the federal highway system. Not very free market either way.

> America’s cities are based on zoning laws

These can and do change, with a single city council meeting. There's nothing impregnable about existing zoning. As usual, the dollar dictates the rules (having been party to 2! eminent domain proceedings in Southern California).

> As usual, the dollar dictates the rules

People really seem to believe this, but it always takes them to wrong conclusions here. For instance, everyone thinks California esp. SF is expensive because of "rich developers" but it's not. It's expensive because armies of retired people come to city council meetings and shut down any development because it'll hurt their 60s nostalgia.

Now, those people are acting to raise their own property values, but that's not why they're doing it. They genuinely just hate people taking their parking spots and think cell phone towers will give them cancer.

I believe it because it's demonstrably true.

> It's expensive because armies of retired people come to city council meetings and shut down any development because it'll hurt their 60s nostalgia.

Maybe in some areas, but in Southern California this is fantasy.

(California) Brea's mall expansion forced eminent domain on founding neighborhoods for commercial development. That never came and was sold back to new developers for gentrification. I had a property that I was paid well for, but I did not want to sell. So I bought into Santa Ana.

In 2009 The Irvine Company put out magazine that detailed the commercial expansion to the adjacent 2525 N. Main Street and eventually the Park Santiago neighborhood. That has been in progress for 2 years, after the necessary city council members were termed out of course. The NIMBYs there are of the aforementioned demographic, alongside their descendants. It's as ineffective. I have pre-emptively sold, but you can still attend the futile meetings if you like (https://park-santiago.com/)

Maybe the city is lacking a tax base. That tends to happen, since another thing the retired crowd did was vote themselves out of paying property taxes. When they do lose a battle, it can be because the city needs some sales tax and commercial property to keep the schools open. (See Cupertino - they can lock out apartments for a decade but can't stop Apple from doing anything.)

Really? Seems obvious to me that its the opposite.

The US can always find other countries that manufacture things for cheap. China can't find other customers. The domestic demand isn't remotely high enough to propel their mercantilist economy, ironically due to the fact that the currency manipulation of the yuan has suppressed the wealth of Chinese citizens by devaluing their savings.

The idea that Americans are too weak and whiny to tolerate inconveniences can be refuted by every natural disaster here. People band together, and grin and bear it. Just like every other nation.

How a nation where most of the older generation have only 1 child to support them will fare with an economic crash is uncertain, because the one-child policy was an experiment that's never been attempted before. I think it certainly boosted wealth, but I suspect it created a society that is less resilient.

China already has other customers and a big and growing internal market. Of course, USA is one of the bigger customers but not the only.

On the other hand, USA cannot import enough copper, aluminium and iron... (It's mined in China and Chinese controlled territories...) And create and staff factories out of thin air.

I'm sure those minerals are mined elsewhere.

In copper, top 3 are: Chile, (one fifth) China, Peru (similar to China).

In iron: Australia, Brazil (half of former), China (similar to Brazil).

In aluminium: China, Russia (similar to China), Canada (tenth of former).

So except for aluminium, this would be very problematic but not insurmountable. I bet Russians won't sell their aluminium to US without many strings attached.

Australia and Guinea both have more bauxite than China, it's just that China currently refines more bauxite into aluminium than the former.

Iron is incredibly abundant in the USA, and regarding copper, see here:

https://www.usgs.gov/faqs/how-much-copper-has-been-found-wor...

"Of the identified copper that has yet to be taken out of the ground, about 65% is found in just five countries on Earth -- Chile, Australia, Peru, Mexico, and the United States. "

The US can import stuff from any number of other countries at higher prices. Who is China going to send its manufactured goods to?

The US accounts for just under the 19% of Chinese exports. That is not trivial, but the domestic (and non-US international) market is growing fast enough that it can absorb that hit faster than it would take other countries to develop capacity to make those goods at the standard that American buyers demand.

Sure, it would mean lost economical potential for China, but by no means would it leave China with no place to send its manufactured goods.

>Unless that is an absolute certainty then and this is a game of high stakes chicken, then I would say the USA has more to lose.

Nothing is ever certain and that's not how people make decisions. What are you waiting for Chinese to use manipulated currency to buy local factories all over the world? It's already nearly too late.

> Nothing is ever certain.

That's exactly my point. I was pointing out that unless the previous comment was absolutely true (i.e., China would be wrecked and the USA would not be) then even if both fare badly the USA would __relatively__ be hurt more.

I disagree and I don't think that conclusion logically follows from what you said.

Who exactly will be demanding to liquidate their yuan? Offshore yuan deposits amount to under ¥2tn. China has foreign exchange reserves worth $3.1tn (¥21.8tn). Enough to buy back all offshore yuan deposits ten times over, and still have more reserves than all but eleven countries.

China has enforced strict capital and currency controls over decades to protect its currency from external shocks like an attempted run on the yuan. There may be lots of vulnerabilities in the Chinese financial system, but currency is not one.

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