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Chinese General Says U.S. Provocation Risks Economic Response

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Aug. 10 (Bloomberg) -- A Chinese general said U.S. plans to send a nuclear-powered aircraft carrier to the Yellow Sea may lead to retaliation from China, the biggest foreign holder of Treasuries.

"Imagine what the consequence will be if China’s biggest debtor nation challenges its creditor nation," Major General Luo Yuan, deputy secretary general of the People’s Liberation Army Academy of Military Sciences, wrote in an editorial today in the state-controlled English-language Global Times.

Pentagon spokesman Geoff Morrell told reporters Aug. 5 in Washington that there will be joint drills with South Korea over the "next several months" in the Yellow Sea, the water between the Korean peninsula and China’s coast. The drills are aimed at deterring North Korea from further provocations after the communist country was accused of sinking the South Korean warship Cheonan in March.

Luo said the U.S. is trying to "threaten the Chinese people and test China’s bottom line with this maneuver," adding that deployment of the carrier to the area will damage U.S.-China ties.

Luo’s remarks go beyond China’s official response to the planned naval exercises. On Aug. 6 Foreign Ministry Spokeswoman Jiang Yu said in a statement that China has "already expressed our clear and unwavering position on the South Korean-U.S. military exercises in the Yellow Sea on many occasions."

“We urge the relevant parties’ to treat China’s concerns and positions seriously,” Jiang said. On July 21 the ministry said in a statement that China was ’’firmly opposed’’ to any threatening military activities in waters off its shores.

China held $867.7 billion in U.S. Treasury securities as of May 31, according to Treasury data. Major General Luo, whose rank is the lowest of three levels for generals in the PLA, has previously urged economic measures against the U.S. In February, Luo, writing in the official Outlook Weekly, said China should consider dumping some Treasury bonds following the U.S. announcement of an arms sale to Taiwan, Reuters reported at the time.

To contact the reporter on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net

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