"...Labeling China a currency manipulator or engaging the Red Dragon in an all out trade war will have consequences, but analysts are divided over what those consequences would be.
When pressed on the currency issue, Beijing traditionally has threatened to stop financing U.S. debt. China is the world's largest holder of U.S. Treasuries, with holdings of $846.7 billion in July.
Lou Jiwei, chairman of China's $300 billion sovereign wealth fund earlier this month said China should diversify its assets away from the dollar if the United States maintains loose monetary policy that weakens the currency.
"For China, the chief tools to reduce economic risks are to strengthen regulation of capital flows, control liquidity through cash management, monitor asset markets and divert foreign exchange reserves to non-dollar assets," Lou said.
Ding Yifan, a policy guru at the Development Research Centre, said China could force a rise in U.S. interest rates by unloading its holdings of U.S. debt, estimated at over $1.5 trillion. His comments at a forum in Beijing followed a string of remarks by Chinese officials questioning US credit-worthiness and the reliability of the dollar..."
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