[DarkInsight]

First, I am not well versed in economy and hence don't know many of the specific term, I apologize for the inconvenience.
During a recent discussion with a Chinese, he claimed that since China is holding a lot of American debt,if China/Japan/Russia decide to sell the debt, US would be "doomed"(his original word).

And then I argue that since exports consists about 39.7% of　China GDP 2006, and 19.1% of exports went to US (2007), a falling US economy would bring more harm than the strategic victory. But then he claimed that the failure of US economy wouldn't cause so much problem to China economic development.


Well, my question is, how much really does China GDP depends on exports and especially exports to US? And how much damage will a US economy breakdown cause the PRC?

[Dave]

China's economy depends tremendously on the US market, but there's no reason it couldn't shift its production toward internal demand.

If China dumped out debt it would cause the value of the dollar to collapse internationally. Inflation and the costs of imports would skyrocket, imposing severe hardship, but the US would be able to weather it. The biggest problem I suppose would be paying for energy imports, since we can easily do without imported consumer goods and food. I suppose a sharp fall in consumption and emergency shifts to various domestic sources would be doable.

[PredatorOC]

And then I argue that since exports consists about 39.7% of　China GDP 2006, and 19.1% of exports went to US (2007), a falling US economy would bring more harm than the strategic victory.

A falling US economy could even be a boon for China in the long run. The difference between imports and exports between China and the US has caused China to make up the difference by printing Yuans. They've been able to keep price inflation in check by raising reserve requirements and what not, but that won't last for long. Eventually China will have to abandon the dollar peg to safeguard against price inflation. A decrease in US demand for Chinese exports would take some of the pressure of the Yuan and might set the Chinese economy on a more stable footing (as opposed to the current situation of sitting on a huge reserve of dollars).

You have to keep in mind that China's economy is far more healthy than most Western economies at the moment. They've been saving their money, while the West has been spending.