China skeptical about Geithner message
Treasury Secretary Timothy Geithner is in China to reassure America's biggest creditor that its investment in U.S. debt is safe. But the Chinese aren't so sure. John Dimsdale reports.
U.S. Treasury Secretary Timothy Geithner delivers his speech at the National School of Development of Beijing University in Beijing, China. (Andy Wong-Pool/Getty Images)
More on International, Asia, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: Timothy Geithner was in Beijing today. The Treasury Secretary is in China for consultations with America's largest lenders. He tried to assure them that their huge investments in U.S. debt -- on the order of a trillion dollars or more -- are safe. Chinese leaders have been openly squeamish lately about Washington's ballooning deficits and the instability of the U.S. economy. And Geithner's message today, that Obama administration can cut its debt and save the U.S. banking and auto industries allat the same time, was met with some skepticism as our Washington bureau chief John Dimsdale reports.
JOHN DIMSDALE: When Secretary Geithner insisted to a Peking University student that China doesn't need to worry about the safety of its U.S. investments, the audience laughed. Donald Straszheim of Straszheim Global Advisers travels frequently to China and isn't surprised by that reaction.
DONALD STRASZHEIM: We have no leverage with them as far as I can tell. Most recent trips I've been there, its all been skepticism and nervousness about our markets, our economy, our economic management, which is understandable. China is going to listen politely but go their own way.
But China won't get very far without the U.S. says Greg Mastel, a trade policy adviser to the Washington law firm of Akin Gump.
GREG MASTEL: We have as much influence over them in the sense that we are literally too big to fail from China's perspective. So, they'd be among the world's biggest losers if the U.S. economy went into the tank. Not to mention we're the world's largest market for Chinese goods, so there are a lot of toys and games that wouldn't find a consumer if it weren't for the U.S.
Geithner told China's leaders they can help the U.S. recover by reducing cheap exports and promoting Chinese domestic consumption. That would increase demand for more U.S. exports as well. That, in turn, could balance the lopsided trade between the two countries. But Straszheim says China, just like the U.S. and every other country, will continue to keep its currency cheap to boost its own exports.
In Washington, I'm John Dimsdale for Marketplace.
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06/03/2009
During the Reagan Administration, when he didn't want to raise taxes to pay for increased Federal spending, Japan bought our t-bills, to pay for our spending--which we have to pay back--while it was warned, the Japanese would take us over because they were running our economy our way.
The result was, Japan stumbled, and China became our competitor in the largest consumer market game. China, not following our ways to the letter, became strong enough that cheap labor is now done in India or Malaysia or Thailand...while the Chinese continue to buy our T-bills, again so we don't have to raise taxes until its time to pay back those bonds and T-bills.
So long as Saudi Arabia sells oil in American dollars, all countries want the dollars in their banks to be strong. But, if a country decides to get its energy by ways other than oil, like if China finds a way to make coal non-polluting, or goes solar or wind, etc...then the dollar's value only depends upon selling products in America. If that means China eclypses America as a consumer marketplace...
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