Dollar Survival Behind US-China Tensions
By Finian Cunningham
01, 2013 "Information
Clearing House -
The escalation of military tensions between Washington and
Beijing in the East China Sea is superficially over China’s
unilateral declaration of an air defense zone. But the real
reason for Washington’s ire is the recent Chinese
announcement that it is planning to reduce its holdings of
the US dollar.
to offload some of its 3.5 trillion in US dollar reserves
combined with China’s increasing global trade in oil based on
national currencies presents a mortal threat to the American
petrodollar and the entire American economy.
This threat to US viability - already teetering on bankruptcy,
record debt and social meltdown - would explain why Washington
has responded with such belligerence to China setting up an Air
Defense Identification Zone (ADIZ) last week extending some 400
miles from its coast into the East China Sea.
Beijing said the zone was aimed at halting intrusive military
maneuvers by US spy planes over its territory. The US has been
conducting military flights over Chinese territory for decades
without giving Beijing the slightest notification.
Back in April 2001, a Chinese fighter pilot was killed when his
aircraft collided with a US spy plane. The American crew
survived, but the incident sparked a diplomatic furor, with
Beijing saying that it illustrated Washington’s unlawful and
systematic violation of Chinese sovereignty.
Within days of China’s announcement of its new ADIZ last week,
the US sent two B52 bombers into the air space without giving
the notification of flight paths required by Beijing.
American allies Japan and South Korea also sent military
aircraft in defiance of China. Washington dismissed the Chinese
declared zone and asserted that the area was international air
A second intrusion of China’s claimed air territory involved US
surveillance planes and up to 10 Japanese American-made F-15
fighter jets. On that occasion, Beijing has responded more
forcefully by scrambling SU-30 and J-10 warplanes, which tailed
the offending foreign aircraft.
Many analysts see the latest tensions as part of the ongoing
dispute between China and Japan over the islands known,
respectively, as the Diaoyu and Senkaku, located in the East
China Sea. Both countries claim ownership. The islands are
uninhabited but the surrounding sea is a rich fishing ground and
the seabed is believed to contain huge reserves of oil and gas.
By claiming the skies over the islands, China appears to be
adding to its territorial rights to the contested islands.
In a provocative warning to Beijing, American defense secretary
Chuck Hagel this week reiterated that the decades-old US-Japan
military pact covers any infringement by China of Japan’s claim
on the Diaoyu/Senkaku Islands.
It is hard to justify Washington and Tokyo’s stance on the
issue. The islands are much nearer to China’s mainland (250
miles) compared with Japan’s (600 miles). China claims that the
islands were part of its territory for centuries until Japan
annexed them in 1895 during its imperialist expansion, which
eventually led to an all-out invasion and war of aggression on
as Beijing points out, the US and its postwar Japanese ally
both have declared their own air defense zones. It is indeed
inconceivable that Chinese spy planes and bombers could
encroach unannounced on the US West Coast without the
Pentagon ordering fierce retaliation.
Furthermore, maps show that the American-backed air defense zone
extending from Japan’s southern territory is way beyond any
reasonable halfway limit between China and Japan. This
American-backed arbitrary imposition on Chinese territorial
sovereignty is thus seen as an arrogant convention, set up and
maintained by Washington for decades.
The US and its controlled news media are absurdly presenting
Beijing’s newly declared air defense zone as China “flexing its
muscles and stoking tensions.” And Washington is claiming that
it is nobly defending its Japanese and South Korea allies from
However, it is the background move by China to ditch the US
dollar that is most likely the real cause for Washington’s
militarism towards Beijing. The apparent row over the air and
sea territory, which China has sound rights to, is but the
pretext for the US to mobilize its military and in effect
threaten China with aggression.
In recent years, China has been incrementally moving away from
US financial hegemony. This hegemony is predicated on the US
dollar being the world reserve currency and, by convention, the
standard means of payment for international trade and in
particular trade in oil. That arrangement is obsolete given the
bankrupt state of the US economy. But it allows the US to
continue bingeing on credit.
China - the second biggest economy in the world and a top
importer of oil - has or is seeking oil trading arrangements
with its major suppliers, including Russia, Saudi Arabia, Iran
and Venezuela, which will involve the exchange of national
currencies. That development presents a grave threat to the
petrodollar and its global reserve status.
The latest move by Beijing on November 20 giving notice that it
intends to shift its risky foreign exchange holdings of US
Treasury notes for a mixture of other currencies is a harbinger
American economy’s days are numbered, as Paul Craig Roberts
noted last week.
This is of course China’s lawful right to do so, as are its
territorial claims. But, in the imperialist, megalomaniac
mindset of Washington, the “threat” to the US economy and
indebted way of life is perceived as a tacit act of war. That is
why Washington is reacting so furiously and desperately to
China’s newly declared air corridor. It is a pretext for the US
to clench an iron fist.