Is it possible for china to pull all of its stock investments from america and hurl us into a depression?

No, it would depress values of US assets which would instantly make US assets and exports look far more valuable. Other foreigners/US citizens would quickly pick up the slack.

Furthermore, an action like that would make China unable to maintain its fixed exchange rate. This would force appreciation of Chinese currency and would reduce the export sector of China. This would hurt China's economy just as much, if not more, than it would hurt the US economy.

China has so much control over us now that it is scary. but to answer your question, yes.

No. China is a very poor country...and very overpopulated.

Which in turn ruins their own economy so, why would they want to do this anyway?

absolutely...it is just one of the many things that china could do, that could hurt us indefinitly.

No America doesn't need China's help, as it is doing it all by herself.

They won't sell us much anymore if they do. We need money to buy from them. It's a two way street.

Yes it is. However, the China currency value is pegged on the US Dollar so it would be very unwise for them to do that. If they unpegged their currency, then they could easily pull their investments.

yes it's possible, but not likely. For more info on such a scenario, watch the movie "ROLLOVER".

Yes its possible. It is also possible that we would retaliate in some form. Nothing good would come of it.

Theoretically, possible (and so is the reverse). Two problems with making it real - first, if they pulled all their investments they'd hurt themselves almost as much as they hurt us. Second - who's 'they'? China doesn't own investments in the US - Chinese citizens do (ok, and the Chinese government to some extent). If every Chinese citizen who owns investments in the US decided to pull them simultaneously, yes, it would hurt us. But it's about as likely as an entire forest of leaves falling off their trees in the same second!

Yes, and the great "ownership society" could go into exile as well.

not without a lot of pain to themselves.

for every seller in the markets, there has to be a buyer.


whenever any large player makes a major move, and China is a large player, they know in advance that they will have to give some on the price to get into or out of the position they want.

in essence, the market moves prices to penalize large players for anything they do other than sitting tight where they are.


China could sell assets that trade in the US markets. When she bought them, prices were bid up as she was buying and were she to decide to sell, prices will be bid downward as she is selling.

so she'd lose, at least on paper, by doing so.

***
every major mutual fund and every major stock analyst in the world suffers from the same problem -- anything they say or try to do moves the market against them because, in order to find the person on the other side of the deal, they have to bid more when buying and cut prices when selling.


does this help?

No. China has few (if any) stock investments in U.S. companies. But it does own (as most major nations do) billions of dollars worth of our debt, in the form of treasury bills and bonds. If it decided to sell all of this, interest rates would rise rapidly, and this could put us into a recession.

It is a strange situation china depends on US purchases to sell its goods to and america depends on the lending that it gets from china to cover business costs and create demand. Neither country would benefit from China doing what you suggested it would ruin both.

It isn't foreign stock investing you need to worry about; its bond investing.

I doubt it. For better or for worse we (the world economy) are all in a "big boat". A leak on one side of the boat spells danger for all. Case in point: even though the current credit crisis is primarily a US problem but its effect has reverberated throughout the world economy. Bottom line is (an oxymoron!) the world economy has truly become a WORLD economy i.e. a symbiotic relationship now exists between the various economies of the world.

--- Razzy

p.s. What all of the above means is that China would be only hurting itself by doing something like you suggest. JMHO.

Would not have to. Just stop buying the worthless IOUs of the U S government. But that would not do them any good either. Throwing the U S into a depression is not something China would really relish.

Yes, they could require repayment of the debt. The resultant disaster wouldn't just throw us into recession; it would precipitate WWIII

China has very few investments in US listed companies ("stocks"), but it does hold a lot of US debt. Sure, China could sell off all that USD-denominated debt, crush the USD, and have the US fall into recession -- but would it make sense for China to do that to its biggest customer (by far)? Does China want to put literally tens of millions of its factory workers in coastal cities out of work? Of course not. D

Yes it sure is.