Yes and no - I think the key to China's game is it doesn't really care about wealth anywhere near as much as it cares about power and control. There's a Chinese proverb [flamesuit on in case I get it wrong!] that you can only control something if you can kill it.
Obviously the US could write off / devalue its currency, but only by committing geo-political harakiri in the process.
By building a dominant position in world trade it's simultaneously gaining a massive industrial infrastructure (paid for with US debt) and undercutting any potential competitor in the second or third world.
Does it care about the wealth and welfare of its own citizens? Well, this news article "Villagers Search for Deadly Rocket Debris" pretty much sums up that they don't:-
http://www.scmp.com/portal/site/ ... ss=China&s=News
at least, compared to world power, enriching their citizens comes a very distant second ... and if in the process they can convert some of the debt by buying up natural resources in third world countries, so much the better ...
So I don't think they actually care what the US does with the dollar. They want the IOUs for the power it gives, not for physical wealth it represents.
Apropos there was a graft case a while back, where a gangster lent a small sum of money to a US senator (something like $15k or maybe even less), the senator defaulted on the loan, and the shark never collected. When interviewed and asked why he didn't enforce the loan, he said "for $15k I can own a US senator, why would I want to collect?" ... clearly power matters more than money, even in the 'land of the free' ...
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Last edited by DArtagnan at 19-1-2010 16:40 ]