The Chinese market is now the world’s largest market for a multitude of goods. An international company unable or unwilling to enter into the Chinese market would face devastating effects to their profits. Any of their competitors in their industry that could gain access to China’s market would have a competitive advantage, leaving the health and existence of the company left out of the Chinese market in high risk. In reality, China’s trade policies affect foreign investors and China’s domestic businesses are the only ones receiving the rewards from their unfair trade policies.

Currently international companies wishing to enter into the Chinese market have to overcome policy hurdles as “…foreign executives [feel they are put] at a disadvantage against increasingly potent Chinese competitors or [are compelled to] transfer valuable technology to China, or otherwise limit their access to what is now the world’s biggest market for goods from trains to cars to cellphones”, writes Jason Dean of The Wall Street Journal.

Already, three American powerhouses have publicly spoken out against China’s market policies, including GE, Microsoft and Google. Most notably, in March, Google suspended its search service in China because the search giant claimed China was the source of a series of cyberattacks, and Google’s top executives admonished China’s censorship policies. Furthermore, Dean writes, “Microsoft CEO Steve Ballmer, in remarks at the All Things Digital technology conference in June, said China’s intellectual-property protection regime will be problematic for the technology industry.” As for the issue of censorship in China, Dean quoted Ballmer saying, “We are staying and trying to be part of a reformation process.

Here’s the thing. The main reason we are experiencing trade problems in China is simple. Currently, they have all or a majority of the leverage. Setting aside that China is a market leader in many in-demand goods, there is the $900 billion in U.S. debt that China currently holds, putting them third on the list of largest holders of US debt.

If China were to utilize what they call the “nuclear option” (or what is essentially a sell-off of all their U.S. holdings) that would cause a massive decline in the value of the U.S. dollar, and hit the housing market through an increase in U.S. bond yields. In other words, were China to exercise this option, the already weak dollar, and already fragile, if not broken, housing market would be hit harder than they have been, sending the overall U.S. economy into a tailspin.

China recently assured that it would not exercise a nuclear option. However, this assurance does not change the amount of leverage the country holds. The reason China threatened the nuclear option is due to the U.S.’s wish to impose sanctions to force a yuan revaluation. So, what options do we have in combating the unfair currency pegging and the other plethora of trade issues if China has so much control over what we can and cannot do? As long as we remain in the WTO, China has assured access to U.S. markets. We can attempt to battle it out via the WTO, but given its history, as usual the U.S. would be better off dissolving from the WTO altogether.

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