President George W. Bush on Wednesday said China would be "foolhardy" to attempt to push down the dollar in retaliation for US pressure over Beijing's alleged currency manipulation.
Bush said he had not seen the report that Beijing was hinting at such a move, in Britain's Daily Telegraph newspaper, but warned against any attempt by China to hit back at Washington using vast foreign currency reserves.
"That would be foolhardy of them to do that," Bush said in an interview with Fox News, adding he doubted the report was based on sources from the office of Chinese President Hu Jintao.
"If that's the ... position of the government, it would be foolhardy for them to do this."
US Treasury Secretary Henry Paulson meanwhile said on CNBC that suggestions that China was considering selling off dollar denominated assets to hammer the already weakened US dollar were "absurd."
"We have tensions and we have to deal with tensions on both sides ... but overall, both of our countries are committed to a constructive economic relationships," said Paulson, who returned from talks with top leaders in China last week.
China said on Friday it would not be pressured into currency reform as Washington and the US Congress renewed calls for it to speed up changes to make the yuan more market-oriented.
The Telegraph reported that two officials at leading Communist Party bodies had given interviews in recent days warning that Beijing might use more than a trillion dollars in foreign reserves as a political weapon in the event of US sanctions designed to punish Beijing for yuan manipulation.
Described as China's "nuclear option" in the state media, such a move could trigger a crash of the already-falling greenback and a spike in the US bond yields, which could then dampen the beleaguered housing market and put the world's richest economy into a recession.
When asked whether such an option would hurt China more than the United States, Bush said, "Absolutely. I think so."
China reportedly holds some 900 billion dollars in a mix of US bonds.
Bush said the United States and China could resolve their differences "in a cordial way" as opposed to the reported option by Beijing of liquidating its vast holdings of US dollars or through legislation by the US Congress imposing sanctions on China.
He cited a high level "strategic economic dialogue" chaired by Paulson and Chinese Vice-Premier Wu Yi as an effective channel to discuss differences between the two powers.
Bush said the two powers had "a very complex trading relationship" and that it was "very important" for the US economy to have access to the vast Chinese market.
Güncelleme Tarihi: 09 Ağustos 2007, 15:07