It is popular to speculate about what might happen if China ever grew tired of providing the United States with cheap capital to fund [mass consumerism/the real-estate bubble/our exorbitant lifestyle/our fat/flat-screen televisions/the deadly "greed virus"]. We think these questions overblown. It might be simplistic to think about Sino-American economic relations as China lending us money at low rates so that we can buy massive amounts of cheap exports that the Chinese would never want and could never use, thereby keeping their unemployment rates low and providing a nice return on their investment. Then again it might not.
Chinese leaders are not as concerned with staying in power as not being shot in the back of the head. The bargain the Party has struck with its subjects (“Leave the political power to us and we will deliver you a measure prosperity via ‘capitalism lite,’”) doesn’t leave much room for maneuver if the prosperity bit starts to slip. It isn’t an accident that the government recently made some gentle reminders to its humble citizens (and not so humble students) that another Tienanmen wouldn’t be tolerated. So, dump treasuries in bulk? Not so fast. But they will, we think, try to get some mileage out of the perception.
The premier said Beijing expected to see results from President Barack Obama’s economic recovery plan but expressed concern that massive U.S. deficit spending and near-zero interest rates would erode the value of China’s huge U.S. bond holdings.
That’s right, Mr. President. You work for Beijing now.
China is the biggest holder of U.S. government debt and has invested an estimated 70 percent of its $2 trillion stockpile of foreign exchange reserves, the world’s largest, in dollar assets.
“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries.
“I would like, through you, to once again request America to maintain their creditworthiness, keep their promise and guarantee the safety of Chinese assets,” Wen said.
This may well end in tears.
China expresses worry over its U.S. assets [Reuters]
Maybe we can start by shutting down the tap with the 5 billion dollars we give Israel every year for no apparent reason.
Not to worry, China: you will get back every red cent, plus interest, if Ben Bernanke has to print it on his office laser printer and deliver it in his ‘96 Volvo personally.
#1 repeat, substitute “ethanol plants”
@1: That’s really a Defense Industry subsidy program, as the lion’s share of it is immediately spent on armaments manufactured by US firms. Kinda like how when you learn the Food Stamp program is administered by the Department of Agriculture, NOT Health and Human Services, certain things about it suddenly make way more sense.
Gin wo de pi gu, bitches!
Fa rara rara ra ra..ra ra.
-Ralfie
You’ll get the money when we get the money!
This is absolutely are biggest concern and our main diplomats are Clinton and Geithner…that is scary! China just increased defense spending by 15%…they are more patient than us…they will just wait for us to implode…and will have the defense to keep us away. Remember the South had better soldiers but the North still won, its a simple numbers game and they got ‘em…they have more farmers alone than we have people…
Teach your kiddos mandarin chinese and brush up on your buddhism…
fuck em, selective default, the three sweetest words in the english language
China should reduce their spending on treasuries and start buying GM, Ford and Chrysler cars. But in reality China has experienced a slump in imports at the same time their exports are tanking. Who the hell knows what’s happening.
Bottom line: China is posturing for the G20 meeting. They are good at that sort of thing.
hey 8 take your ritalin
Bart: What happened China, you used to be so cool?
Chinese Man: China still cool
@8
Our military spending dwarfs ANYONE in comparison. You’d do well to remember that.
it is just the mutually assured destruction doctrine updated for the happy huggable 2000s
china has a HUGE deficit in females give the one child policy and selective abortions.
They will demand succulent nubile women as collateral to preclude any US default.
“ALL YOUR BRONDIES ARE BERONG TO US!!”
Tear down dat shitty wall! God damn mongorians!
China is not lending us money because they WANT to. Instead, they are pursuing a weak yuan currency policy. We send them dollars for their goods. Unless they make their supply of dollars disappear, they buy treasuries (as opposed to flushing them down the toilet).
Unfortunately, if our interest rates shoot up (which they will, eventually), it will be JUST like they flushed a bunch of dollars down the toilet.
In the prescience of High School Musical: We’re all in this together.
China is not lending us money because they WANT to. Instead, they are pursuing a weak yuan currency policy. We send them dollars for their goods. Unless they make their supply of dollars disappear to keep the relative supply of dollars scarce relative to yuan supply therby maintaining their labor cost edge, they buy treasuries (as opposed to flushing them down the toilet).
Unfortunately, if our interest rates shoot up (which they will, eventually), it will be JUST like they flushed a bunch of dollars down the toilet.
In the prescience of High School Musical: We’re all in this together.
Professor Terguson: You remember that thing we had about 30 years ago called the Korean conflict? And how we failed to achieve victory? How come we didn’t cross the 38th parallel and push those rice-eaters back to the Great Wall of China?
Professor Terguson: [rips a desk apart] Then take the fucking wall apart
[shouts]
Professor Terguson: brick by brick and nuke them back into the fucking stone age forever? Tell me why! How come? Say it! Say it!
Thornton Melon: [incensed] All right. I’ll say it. ‘Cause Truman was too much of a *pussy wimp* to let MacArthur go in there
[shouts]
Thornton Melon: and blow out those Commie bastards!
Professor Terguson: Good answer. Good answer. I like the way you think. I’m gonna be watching you.
I want to see the Chinese haul over Cuomo and Barnie Frank over and force them to disclose all their finances. I also want the Chinese Maxine Waters (common Chinese people, help me out over here) to rip into the Maxine Waters of California.
After all, they are bailing out a bankrupt organization which has failed and is now getting bailed out by the Chinese and Japanese so they have the right to do anything that they want to.
And oh, no jetting around the country on private jets for weekends people. The Chinese are looking at you Pelosi and Obama.
Bugger thy neighbor, his neighbor, their neighbors and the whole damn neighborhood.
-C
No more yankie my wankie. The Donger need food.
@12, + 1.3 billion
@17, “we’re all in this together”
Not if you’ve got that TBT, friend.
When they finally do expect payment, will they bring a check with a cut-up orange?
For at least the next ten years it looks like we’ll be Chinese bitches because their poorly educated, unskilled masses don’t feel entitled to $ 25-50 an hour for easy labor w/ a fat pension just because they were born in the USA. How can we compete with that?
Doesn’t the CPC assume people will riot if GDP goes below 6.5%? Maybe that’s what the tanks are for. Although looking at copper, they must be fairly optimistic about internal expansion at least.
So, what happens next for the US? The Chinese Purchase? Twenty percent of Microsoft, Wal Mart, etc.?
@#25 Comment O’the Day.
This post has some of the best comment-tude of the week. @25,@15,@12,@6
“Leave the political power to us and we will deliver you a measure prosperity via ‘capitalism lite,’”
Shame that China and the US while starting at different ends essentially came to the same point.
The Chinese financed the sales of all their shit to the West effectively themselves and are now a bit worried that Bernie and team are going to deflate themselves out of this mess. And there’s nothing they can do lest they assist in the destruction of their largest consumer. So back to Beijing and your nightmares buddy; all your credit belongs to us.
Let me tell you about your blood, bamboo kid.
it ain’t koke kola, it’s rice.
seriously, what are they going to do about it?
boycott the payment.
Just more unpatriotic negativity from liberals who hate America, Ronald Reagan, the honest hardworking business leaders of America, and the troops.
Fuck em, just to see the look on their face.
Let’s get it on…
“We think these questions overblown.”
Who, you and Bess?
Always hated McArthur…not because he didn’t “nuke” China because he couldn’t win on the Peninsula…but because he was so pompous as to even request permission to send bombers over mainland China. The “nuking” request was absurd. China still had good relations with the Soviets then and they Soviets certainly had the means to deliver any comparable response. MAD.
Regarding this topic, doubtful they will do anything but buy less. Why would they want a stronger dollar? What comparable market with that kind of liquidity/capacity is there? They are the definition of moving the market
How now Rong Bond ?
wow, some pretty funny comments here, but some of posts with the pronunciation stereotypes are FAIL-blog-worthy, aka, confusing japanese with chinese (r is pronounced l in japanese romaji). and then there’s the wrong pinyin. sigh, what are they teaching to kids in schools these days? stereotypes are only funny when applied correctly, kids!