China's military studies Treasury sale as Taiwan 'retaliation'

Senior officers suggest dumping bonds to punish U.S. for arms sales to Taipei

HONG KONG (MarketWatch) -- Several high-ranking Chinese military officers want Beijing to sell off U.S. Treasurys as a part of measures to punish Washington for its recent approval of new arms sales to Taiwan, according to a report Wednesday.

A U.S. sovereign-bond sale was part of broad retaliation measures under study by military personnel at the National Defense University and Academy of Military Sciences, according to a Reuters report citing interviews with the officers that appeared in the state-run Outlook Weekly.

The Chinese weekly cited comments by three military officers -- two of major general rank and one senior colonel (the Chinese equivalent of a brigadier general) -- with a sell-off of U.S. bonds among an array of retaliation moves, also including stepped up military spending and troop deployments focused on Taiwan.

China's military has no direct role in setting policy for the management of the nation's foreign-exchange reserves, however, and it's not believed that Chinese policy makers are seriously considering dumping their U.S. Treasury holdings.

Still, the proposal echoes other recent comments for China to use its large holding of U.S. sovereign debt as leverage in foreign policy disputes.