The repeated accusations of White House against Beijing concerning a coronavirus epidemic have ended in demands not to pay debts. Since China remains the largest holder of US government bonds, it is essentially a selective default. RIA Novosti looks at how justified such an initiative is and how it can turn out for the American economy.

Give money!

“In order to punish Beijing for hiding information about the outbreak in Wuhan, which started a planetary-scale health crisis, we need to write off some of the American debt in the reserves of the Chinese Central Bank,” said Tennessee Senator Marsha Blackburn.

It was supported by the well-known Senator Lindsay Graham, the author of several bills on sanctions against Russia and Nord Stream 2. “This is the third pandemic from China. They come from these dirty markets where they have mice and monkeys with a virus, which is then carried through food,” said Graham to Fox News on Monday.

In his view, “the whole world should bill Beijing for the pandemic” and force it to “fork out big”. “And I want to start writing off part of our debt to China, because they have to pay us, and not visa-versa!” said the senator.

Blackburn and Graham are by no means alone in trying to monetise the Chinese origin of the coronavirus. Senator Josh Hawley, co-authored with three other colleagues, has already introduced a bill in Parliament on the need for an international investigation into Beijing’s actions during the coronavirus outbreak and the establishment of a “compensation mechanism”.

All of this is accompanied by a large-scale propaganda campaign involving top government officials. For example, on Wednesday, Pentagon head Mark Esper said in an interview with Fox News that “China continues to hide a lot about COVID-19, as in the initial stages of the epidemic”.

“China could be more honest and provide more information to make it easier for us to cope with the infection,” said Esper, calling for putting “pressure” on Beijing and bringing out the whole truth about the origin of the virus.

Conspiracy theory

Botao Xiao, a former employee of the Institute of Virology in Wuhan, was the first to write about the biological leak on the Internet. He pointed out that one of the research laboratories was six metres from the wholesale seafood market where the epidemic had arisen.

Botao suggested that the “deadly coronavirus is probably created in a laboratory” and it was accidentally brought into town. However, he soon deleted the publication, explaining that the hypothesis had not been confirmed.

However, the narrative of the artificial origin of the virus was immediately picked up by Western media and then by Washington officials. On February 17th, Republican Senator Tom Cotton announced that the infection had emerged from a biochemical laboratory in China’s Wuhan, and promised to bring “those responsible for spreading the deadly pandemic to justice”.

The White House joined in with the accusations. Donald Trump, in his tweets, called COVID-19 a “Chinese virus”.

And US Secretary of State Mike Pompeo thwarted the signing of a joint communiqué by G7 foreign ministers in March, as the majority demanded that the term “Wuhan virus” be removed from the document.

Meanwhile, more and more reputable experts refute such accusations. The New York Times reported that US Deputy National Security Adviser Matthew Pottinger asked intelligence agencies to study the possibility of a virus leak from a laboratory in Wuhan in January, but the CIA found nothing suspicious.

General Mark Milley, chairman of the US Joint Chiefs of Staff, said on Tuesday: “There is plenty of evidence that coronavirus formed naturally”.
Richard Ebright, professor of chemical biology at Rutgers University, explained to The Washington Post: “There is absolutely nothing in the genome sequence of this virus that indicates artificial origin. <…> The narrative of biological weapons must be categorically excluded.”

And yet in the United States, they continue to insist on its own. Last week, the Texas and Nevada courts filed collective lawsuits against China, with more than 5,000 Americans claiming they suffered huge losses because the Chinese allowed coronavirus to spread around the world.

“Our claim concerns those physically affected by exposure to the virus. <…> It is also about commercial activities of China, trade in markets where wildlife meat is sold,” said the law company Berman Law Group, representing the interests of the plaintiffs.

The Americans are demanding $1.2 trillion in compensation. By “random” coincidence, this exactly corresponds to the amount of US bonds on the balance sheet of the People’s Bank of China.

So the court may well prohibit the government from paying for these securities “to ensure the interests of the plaintiffs”. And Washington officials will obediently implement this decision.

Suicide mission

The demands of compensation for the pandemic are contrary to both legal norms and common sense. This was pointed out by Russian Foreign Minister Sergey Lavrov on Tuesday.

“When we hear the reasoning that China will have to pay everyone for the fact that this infection appeared and allegedly someone didn’t inform someone in time… You know, it passes all kinds of limits and all kinds of decency,” said the head of Russian diplomacy.

However, as Washington’s experience of sanctions against other countries shows, such little things concern the US least. After all, the commercial interests of American companies are once again hidden behind the talk of China’s responsibility.

The fact is that in China has already practically managed to cope with the epidemic, and factories and plants have quickly resumed work. But most Western companies are idle due to quarantine. So the markets are open to Chinese expansion – there will be no one to counter them in the coming months.

Washington is going to use the demands of enormous compensation as a leverage to prevent Beijing from taking advantage of the situation. Therefore, there is no doubt that American courts will grant all claims against the Chinese government.

However, the United States itself is at risk of being the main victims of such a development. Because of the prospect of an American default, Beijing has no choice but to urgently start selling off treasuries.

This could completely destroy the US public debt market – investors will stop buying new bond issues because of the excess supply. Consequently, the Treasury will have nothing to finance a record budget deficit, as well as multi-trillion-dollar anti-crisis support programs for the national economy.
If the Federal Reserve dares to cover these costs only at the expense of the printing press, the position of the dollar as the world reserve currency will be permanently undermined.

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Maksim Rubchenko

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