It said so in the article: That said, China has no less than five options how to escalate, the problem being however that all five are what some have dubbed "nuclear" choices, and include: A Currency Depreciation. A sharp, one-time yuan devaluation, like the one Beijing unexpectedly carried out in August 2015, could be used to offset some of the effect of tariffs. Sales of US Treasurys. Chinese authorities could sell some of its large official-sector holdings of US Treasuries, which would lead to a tightening of US financial conditions. Block US services. Chinese authorities could limit access for US companies to the Chinese domestic market, particularly in the services sector, where the US exports $56 billion in services annually and runs a $38 billion surplus Curb US oil shipments. According to Petromatrix, China is one of the biggest importers of U.S. crude oil at 400kb/d, so any counter-tariffs on crude could become very heavy for the U.S. supply and demand picture. Such a move would weigh on U.S. prices and spill over to global oil pricing. As Petromatrix adds, the market would need to start balancing downward price risk of trade-war escalations with upside risk of Iran sanctions as oil flows could be about the same. Blocking rare-earth exports. China has a near global monopoly on the production of rare earths, which are a critical component in all high-tech devices such as cell phones, computers, fighter jets and cruise missiles. In national defense, there is no substitute and no other supply source available. When China blocked rare earth exports to Japan over a territorial spat involving the East China Sea in 2011/2012, the price of rare earths soared.
If they devalue, their USD loans become more onerous. If the divest USD assets, their currency rises, and their exports and USD inflows to service USD debts drop. If they buy from more expensive oil producers, their oil situation worsens. If they curb rare earth dumping, other rare earth producers increase production.
What you have to look for in terms of a nuclear option they have, if they let Yuan float. The Yuan impulsive appreciation would trigger dollar cascade down, which would trigger inflationary pressures and further dumping of US debt. It would be a positive feedback loop. It would be global economic Armageddon.
They have put on near total capital controls because there was a run on the yuan in late 2016. If they take them off, there's no reason to think the Chinese won't run on the yuan again.
China is somewhat unplugged from the Global financial system. Once plug-in, its central bank has to work very very very just to move the needle a tiny bit.
Market is headline dependent here. Seems a dull, no news drift is 250 Dow points up buit I expect bottom of this trade war range to get taken out. Seperately, Powell is unfazed and determined with QT in progress and 3-4 hikes this year. He may be suppressing and sidelining the natural dove speak/rhetoric that has helped stocks in the past .
Been there, seen it, nothing new and China's CNY is still heavily depreciated. China is supposed to be the second LARGEST economy in the world with USA being the largest and yet its currency is only 1/6 of the US dollar. Does that make sense to you? And China is crying wolf to the WTO about USA's tariff. You think WTO would be sympathetic to China's crying if China does a full-fledge currency depreciation that's going to threaten the competitiveness of the rest of the WTO countries. This is the problem of China, always thinking it's the only country that exists in the world. I hope China has gotten smart over the years and knows better not to pull something dumb like this. Just doing the job that Fed Reserve is going to do anyway, tightening the monetary policy and slowing down an overheated economy. USA would be happy not to get their intelligent properties stolen and be forced to divulge and share its proprietary technology secrets. Where do you think China got the technology of redberry, weibo, wechat, alipay from? Japan will be all so happy to scoop up some cheap US oil, yay!! USA is not Japan. USA is surrounded by countries who can readily supply it with rare-earth metals if needs to be, Canada, Australia, just a few comes to mind and besides USA is not a big electronics manufacturer so this "weapon" is really moot. "Hit Their Stocks": Chinese Press Warns Of "Ample Weapons" To Win US Trade War Apparently, China obviously has NO IDEA how stock market works and what's the function of it. LOL I mean trade wars is bad for all parties involved and just like military wars, nobody really wins at the end. I am NOT supporting Trump's trade tariff and the various restriction of trade tactics but if China REALLY wants to take things personal and tries to make this a full-out war, I say "BRING IT"!!!