Chinese see U.S. debt as weapon in Taiwan dispute

China’s military stepped up pressure on the United States on Monday by calling for a government sell-off of U.S. debt securities in retaliation for recent arms sales to Taiwan.

A group of senior Chinese military officers also said in state-controlled media interviews that Beijing’s leaders should boost defense spending and expand force deployments in the wake of the Pentagon’s announcement last month of a new $6.4 million arms package for the island state claimed by Beijing.

Senior officers from the Chinese National Defense University and Academy of Military Sciences made what some view as an economic warfare threat, something outlined in past military writings.

The comments by Maj. Gen. Zhu Chenghu and Maj. Gen. Luo Yuan and Senior Col. Ke Chunqiao appeared in the state-run Outlook Weekly magazine, part of the Xinhua News Agency, published in Beijing on Monday.

Gen. Luo warned that China could attack the U.S. “by oblique means and stealthy feints,” and he called for retaliation for the arms sale.

“For example, we could sanction them using economic means, such as dumping some U.S. government bonds,” Gen. Luo said.

“Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counterpunches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease,” said Gen. Luo, a researcher at the Academy of Military Sciences.

China holds nearly $800 billion worth of Treasury debt securities. It is not clear what impact selling off some of the securities would have on the struggling U.S. economy. However, analysts say that selling off some bonds could drive up interest rates and disrupt U.S. economic recovery efforts.

At the State Department, spokesman P.J. Crowley dismissed the economic threat as potentially self-defeating. “That would be biting the nose to spite the face,” Mr. Crowley said. “The economies of the United States and China are intertwined.”

The Chinese military comments, however, reflect the contents of a 1999 book by two Chinese colonels called “Unrestricted Warfare,” which called on the Chinese military to adopt unconventional methods and strategy in waging war, specifically both “financial” and “trade” war along with other forms of warfare.

The second officer, Gen. Zhu, said Monday that proposed U.S. arms sales to Taiwan threatens Chinese military bases along the southern coast across the 100-mile Taiwan Strait. “This gives us no choice but to increase defense spending and adjust [military] deployments,” said Gen. Zhu, who is with the National Defense University in Beijing.

Gen. Zhu made headlines in 2005 when he told reporters that China would use nuclear weapons to attack U.S. cities if the United States struck China with precision-guided conventional missiles.

The statement raised questions at the time among Pentagon officials over whether China had abandoned its stated policy of not being the first to use nuclear weapons in a conflict.

After the remarks, China’s government sought to play down the incident by quietly putting out word to Western journalists that Gen. Zhu had been demoted, a claim accepted by many U.S. China hands but one that was called into question by his comments in the magazine this week.

The military leaders’ comments are unusual because tightly controlled state-run media in China normally do not permit such provocative comments directly criticizing the United States to be published.

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