GW Bush has approved a 6.5 billion arm deal with Taiwan. I have several competing theories about this deal.
1. US willingly sell the arm package to Taiwan to rise revenue in order to deal with the financial crisis and boost its economy. China certainly do not like it.
2. Considering the GW Bush has delayed the deal before, this may be a nice gesture to CCP even though the CCP has to protest against the deal on the surface. There has been doubt about whether the 2nd Bush administration will let the deal proceed and that has lead to speculations on the U.S. concerns over closer relationship between Mainland China and Taiwan which may make the arm deal actually benefits CCP's defense power. If this concern has some real elements, then GW Bush is using the military goods to persuade the cooperation of China in dealing with the current financial crisis.
3. GW Bush administration is using this deal as a blackmail to force CCP to cooperate with US in dealing with the financial crisis.
Anyway, to finance the 850 billion dollar rescue plan, US need foreign investors to purchase its treasury bonds and with 1.7 trillion USD reserves, China is one of the biggest possible buyers.
Magnus: China Must Reform or Bust - China's debt markets are looking more and more like the West, circa 2007. And it's not clear the government can intervene as successfully.
1 hour ago