China "Worried" About US Debt

By Big Tent Democrat, Section Economy
Posted on Fri Mar 13, 2009 at 12:43:27 PM EST
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I wonder what motivated the Chinese to say this:

The Chinese prime minister, Wen Jiabao, expressed unusually blunt concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that the securities would maintain their value in the face of a global financial crisis. . . . Mr. Wen said he was “worried” about China’s holdings of United States Treasury bonds and other debt, and that China was watching economic developments in the United States closely. “President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures,” Mr. Wen said. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

There obviously is a motivation for saying this - it is not in China's financial interest to cause concern for US debt. What are they after with this?

Speaking for me only

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China "Worried" About US Debt | 68 comments (68 topical)

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Very strange, indeed (5.00 / 1) (#2)
by andgarden on Fri Mar 13, 2009 at 12:50:31 PM EST

There is no way the US is going to default on its debt.

: If the Chinese disagree, I invite them (none / 0) (#4)
by andgarden on Fri Mar 13, 2009 at 12:51:19 PM EST

to buy into the gold bubble.

Been mulling it over since I heard (5.00 / 2) (#10)
by inclusiveheart on Fri Mar 13, 2009 at 01:23:33 PM EST

about it. The truth is that it could be as simple as the obvious which is that we are in economic trouble or there could be any number of backstories related to trade policy, strange boat encounters, a simple desire on China's part to put the Obama Administration on notice that they've got a great deal of power over us now, ugly information about the banking system or all of the above.

It is also worth noting that in some ways our closest relationships in China come by way of corporations like Walmart who are probably influential enough with the Chinese government to ally with them to put pressure on Obama and the Democrats that could deter them from enacting certain pieces of legislation that they all feel is threatening to them.

All guesses at this point. I remember after the Lehman failure that a story was running that the foreign sovereign banks came down hard enough on the Bush Administration to get them to start the bailout program - so it is not all that surprising to see foreign investors weighing in again.

Fiscal scolds (5.00 / 1) (#23)
by Demi Moaned on Fri Mar 13, 2009 at 01:59:26 PM EST

In plain words, the Chinese may be giving ammunition to the fiscal scolds in the US Congress who oppose deficit spending directed towards actually helping the people of the US. I have to say something of the sort did cross my mind.


I first heard about the Chinese (5.00 / 1) (#28)
by inclusiveheart on Fri Mar 13, 2009 at 02:23:21 PM EST

comment this morning on Morning Joe and that is exactly how they spun it - saying that the Chinese are not interested in underwriting Democratic social programs. The question is whether there is coordination on this front between the Chinese and interested American parties; or if it was just a conveniently timed comment that the GOP has siezed upon. They make up a lot of stuff on that show, but they also get their talking points everyday so who knows.


But, the Chinese do want to invest in (none / 0) (#38)
by Inspector Gadget on Fri Mar 13, 2009 at 02:42:51 PM EST

our housing market.

That certainly scares me.


: We better get busy... (none / 0) (#44)
by kdog on Fri Mar 13, 2009 at 03:07:41 PM EST

squatting those vacant homes.

Manuevers in the China Sea... (5.00 / 1) (#58)
by ChiTownDenny on Fri Mar 13, 2009 at 06:49:24 PM EST

This is political by China. But really, threatening it's largest importer of Chinese goods could result in another Mao economy. Nothing but posturing.


Wouldn't be surprised (5.00 / 1) (#59)
by cal1942 on Fri Mar 13, 2009 at 08:47:32 PM EST

It's certainly not in their interest to talk down holding US debt.


I forgot to add that there was that (none / 0) (#19)
by inclusiveheart on Fri Mar 13, 2009 at 01:38:21 PM EST

buy American provision in the stimulus that seemed to annoy a number of our neighbors. I am not sure it survived in tact, but that might be another angle here.


Tibet? (5.00 / 1) (#11)
by squeaky on Fri Mar 13, 2009 at 01:24:28 PM EST

: You are absolutely right (none / 0) (#70)
by MsExPat on Sun Mar 15, 2009 at 05:33:21 AM EST

You guys are all being way too American in your analysis. The Chinese move obliquely, not directly. This comment has nothing to do with economics and everything to do with Tibet.
First of all, it is "Grandpa" Wen who made this statement--not any of the serious finance guys in Beijing. Wen is the front man, beloved by the Chinese public. His job is to deliver the message to the masses: America is in DEBT to China. You owe us.
So--just in case--anybody in the U.S. government got the idea to say anything about the huge wave of repression right now in Tibet (and god knows what will be happening in Beijing in the leadup to the 20th anniversary of Tienanmen Square this June, Wen is reminding us: We own your ass.

Just walking the floor and poking their head into (5.00 / 3) (#12)
by scribe on Fri Mar 13, 2009 at 01:26:56 PM EST

Uncle Sam's cubicle, making sure he's working on their projects and not playing tetris or surfing the web.

In other words, a reminder of who the boss is, and isn't, these days.

Ouch! (none / 0) (#14)
by DFLer on Fri Mar 13, 2009 at 01:30:19 PM EST

heh (none / 0) (#17)
by andgarden on Fri Mar 13, 2009 at 01:35:40 PM EST

Embittered from experience?


Sorta (5.00 / 3) (#30)
by scribe on Fri Mar 13, 2009 at 02:24:54 PM EST

This pretty well expresses the situation I'm talking about.

And, yes, we - um - will be needing you to come in Saturday. Yeaaaah.


LOL... (none / 0) (#33)
by kdog on Fri Mar 13, 2009 at 02:27:33 PM EST

I actually do have 5 bosses, but thankfully none as bad as Lumberg.


Whole reason I refuse (none / 0) (#46)
by Spamlet on Fri Mar 13, 2009 at 03:16:54 PM EST

to be anyone's boss. I would be just like Lumberg. I just know it.


I'm a worse boss than that (5.00 / 1) (#47)
by scribe on Fri Mar 13, 2009 at 03:23:27 PM EST

I lost count of how many times I've gotten tears in response to asking [politely] why my documents were not spell-checked. Again.

Something about my personality, I guess.


If you talked to your workers... (none / 0) (#52)
by kdog on Fri Mar 13, 2009 at 03:36:45 PM EST

with half the scorn you have eviscerated the GOP with on this blog over the years...you'd probably make me cry too old friend:)


: It only sounds like scorn (none / 0) (#56)
by scribe on Fri Mar 13, 2009 at 04:57:42 PM EST

after about five or six iterations of documents not being spell-checked. In reality, rather than being scorn, it's exasperation.
And I always say "please", "can you please", "could you please", "we need", "thank you" and thank people for a job well done.
It's just that some people think that politeness is weakness, and think that they run the office.

: The GOP (none / 0) (#60)
by cal1942 on Fri Mar 13, 2009 at 08:52:48 PM EST

has it coming and then some.

And, you think that's simply your approach? (none / 0) (#54)
by Inspector Gadget on Fri Mar 13, 2009 at 04:09:16 PM EST

The admins who I've worked with (and I've worked with many, many, many) who have that problem weren't hired for their skill set or proven successes in previous jobs. Most also have plenty of typos, misspellings and lousy grammar showing in their resumes, as well.


And, another question.... (none / 0) (#55)
by Inspector Gadget on Fri Mar 13, 2009 at 04:14:11 PM EST

what is the reward for the tears? They get to keep their job and make you look like the mean boss?

My guess is you are simply using the wrong criteria in your hiring process.

O, the stories I could tell!!


Sadly, I have not had the power (none / 0) (#57)
by scribe on Fri Mar 13, 2009 at 05:40:14 PM EST

to hire or fire, thus they get to cry and keep their jobs.

If it were up to me, repeated failure to spell-check would result in an episode of encourager pour les autres, and that would put a quick end to failure to spell-check.

When TPTB decide to not make failures to properly do work a reason for discipline, and instead to come out and get all mushy, comforting and ratifying about someone throwing a tantrum over being corrected, I sit back and recognize that the lesser profitability TPTB are complaining about is solely their own fault. I choose to hold my silence about that, so long as their checks to me continue to clear.

I might remind them - when they complain at me about the slowness of work-product hitting the outbound mailbox - that if they by their own conduct hadn't ratified bad administrative habits I would be able to rely on things being done properly with the result that things would go out more quickly.

Such remarks, though, I usually hold back on, since my experience is that TPTB are so self-unaware that they literally stare blankly, uncomprehending, when confronted with their own bad habits of ratifying bad habits. I got better things to waste my time on.


: My sympathies (none / 0) (#66)
by gyrfalcon on Fri Mar 13, 2009 at 11:42:36 PM EST

This is one example of what caused me 25 years ago to quit the rat race and live happily but frugally on the financial margins as a freelancer.

My guess is inflation (5.00 / 0) (#18)
by cenobite on Fri Mar 13, 2009 at 01:36:44 PM EST

If I were China I would be concerned that the US would devalue its currency (and thus my reserves of US treasury notes). We would do that by printing a lot of money -- thus Chinese officials' concern over US debt.

They should be more (none / 0) (#20)
by SOS on Fri Mar 13, 2009 at 01:39:34 PM EST

concerned about doing something for their own people for a change.


Ding, Ding, Ding (none / 0) (#24)
by Slado on Fri Mar 13, 2009 at 02:13:39 PM EST

The Chinease aren't stupid. They see Obama's ridicluous stimulus, spending and budget and realize that America is broke. We are trying to make up for too much debt (loaned to us by them) by borrowing more (from them) and simple economics tells them and should tell us that we can't keep it up unless we start to produce some actual wealth.

This debt is coming due sometime and the only way the US will be able to pay it off is by printing money and that will mean the debt they are holding is worth less then what they bought it at.

They can stop buying our money and start buying their own products since they are the ones actually producing things.

The elephant in the room is our monetary policy. Inflation is coming. The only question is how bad it will be.


China (5.00 / 1) (#36)
by MKS on Fri Mar 13, 2009 at 02:36:32 PM EST

needs us....We buy their goods....They can only dump on us so much.

The tax increase in 2011 when the Bush tax cuts expire, plus the sale of shares in healthy banks like Citi(?), will help pull cash out of circulation as the economy picks up steam....

And, the Fed will raise interest rates too....


This is pure ignorance (none / 0) (#27)
by MrConservative on Fri Mar 13, 2009 at 02:22:16 PM EST

Why can't you Republicans wrap your head around anything that didn't happen in Reagans term? The current economic situation is like 1932, not 1982. There is absolutely no threat of inflation, and we're doing everything we can to keep ourselves out of deflation. Inflation is definitely not coming. The only question is if we can keep out of deflation.


I don't man... (none / 0) (#31)
by kdog on Fri Mar 13, 2009 at 02:25:03 PM EST

I'm an admitted economics rube but common sense tells me you print a bunch of new currency and inflation is inevitable...only a matter of time.


: Inflation is more complicated than that (none / 0) (#41)
by MrConservative on Fri Mar 13, 2009 at 02:46:24 PM EST

http://www.inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp
Jan 2009 0.03%
Dec 2008 0.09 %
Nov. 2008 1.07%
Oct. 2008 3.66%
Sep. 2008 4.94%

The US (none / 0) (#26)
by MrConservative on Fri Mar 13, 2009 at 02:20:40 PM EST

is at absolutely no threat of inflation. The only thing keeping us out of DEFLATION is the federal reserves ZIRP and the stimulus.


: Printing money (Inflation) could be (none / 0) (#32)
by ding7777 on Fri Mar 13, 2009 at 02:27:14 PM EST

used as a strategy to get out of debt; but how much inflation will China tolerate?

I'm not Machevellian-minded enough.. (none / 0) (#3)
by kdog on Fri Mar 13, 2009 at 12:50:53 PM EST

to know why they're saying this...but if I was China I'd be concerned about that trillion they're holding...for sure. I wouldn't loan Uncle Sam five bucks right now...Uncle Sam looks as dependable as a crackhead right now.

Sometimes a cigar is just a cigar (5.00 / 1) (#62)
by befuddledvoter on Fri Mar 13, 2009 at 09:45:29 PM EST

right on kdog (none / 0) (#25)
by Slado on Fri Mar 13, 2009 at 02:15:30 PM EST

We are broke. Both as consumers and as a government. Only the good name of the dollar is keeping this house of cards upright.

Inflation is coming. Get ready for it.


Pure ignorance (5.00 / 1) (#29)
by MrConservative on Fri Mar 13, 2009 at 02:24:00 PM EST

I think I'm going to have to bring this post to your attention in a couple of years so that you can laugh at your own ignorance.


I'm taking my economic (none / 0) (#39)
by Slado on Fri Mar 13, 2009 at 02:43:13 PM EST

advice from the same people who predicted the fall of the housing market.

You appear to be on the other side of the fence. How about some reason rather then name calling.

It's pretty simple. We can't print money fast enough. That would be one thing if the government wasn't rapidly aquiring debt with no World War on the horizon to bail us out. Nevermind that we have 1/2 industrial workers and producers we had in the 40's relative to our GDP that we had back then.

Massive borrowing and debt creation created the fall. More of the same will result in a bigger debt to be paid in the years to come.

I hope I'm wrong.


The Austrians? (5.00 / 3) (#42)
by MrConservative on Fri Mar 13, 2009 at 02:50:15 PM EST

They're always predicting gloom and doom. So it isn't much of a surprise that they'd hit at least once in a while.

Unless you're not. But the only other group of people I can remember who really predicted it was a few of the Neo-Keynesians, who certainly aren't saying we're heading into inflation.


: Inflation (5.00 / 2) (#64)
by gyrfalcon on Fri Mar 13, 2009 at 11:37:18 PM EST

way down the road when the economy really recovers is definitely a worry, but it's counterable and containable if they handle it right, which I honestly have no worries about.
Right now, though, a little inflation would be an incredibly good sign.

Context? (none / 0) (#5)
by magster on Fri Mar 13, 2009 at 01:06:46 PM EST

2 days ago I read this in a Kos diary regarding an escalation of tension in the South China Sea. This might be a reminder from China to Obama that China will retaliate financially for anything that might happen in this naval dust-up.

And a Chinese (5.00 / 1) (#61)
by cal1942 on Fri Mar 13, 2009 at 08:57:58 PM EST

financial retaliation would be cutting their own throats.


All that "conflict" (none / 0) (#6)
by AlkalineDave on Fri Mar 13, 2009 at 01:15:37 PM EST

was a trumped up spat that doesn't amount to anything. We had a surveillance ship spying, got caught, and played it around in the media. It's spy versus spy, and it happens often. Anyone who believes that China and the U.S. would go after each other militarily is living in the Cold War.


It might explain China's statement today though (none / 0) (#7)
by magster on Fri Mar 13, 2009 at 01:18:01 PM EST

: Definitely (none / 0) (#34)
by AlkalineDave on Fri Mar 13, 2009 at 02:29:43 PM EST

Be freaking deal (none / 0) (#8)
by SOS on Fri Mar 13, 2009 at 01:18:05 PM EST

they all to sell that debt to some responsible countries and use the cash to clean their act up.

People are tired of China's whining when they can't even keep their own act together.

Earth to SOS..... (none / 0) (#37)
by vml68 on Fri Mar 13, 2009 at 02:41:22 PM EST

The US has borrowed 1 trillion dollars from China and you are lecturing them about getting their act together?

they can't even keep their own act together.

Thank you (none / 0) (#40)
by Slado on Fri Mar 13, 2009 at 02:44:47 PM EST

They funded our record debt collection and now are asking to lend us more money while we pay them back the money we borrowed before now.

We are basically Bernie Madoff to their Kevin Bacon. No wonder their nervous.


: They're not nervous (none / 0) (#65)
by gyrfalcon on Fri Mar 13, 2009 at 11:38:30 PM EST

They're just trash-talking for some obscure reason of their own probably related to internal political struggles.

perhaps they're after a role in Afghanistan (none / 0) (#9)
by DFLer on Fri Mar 13, 2009 at 01:20:06 PM EST

They share a small border at the tip (the Wakhan corridor). They want to mine copper there. They could have a role in rebuilding/building the infrastructure...roads and rails, etc, in order to get the copper out.

The US could give them that role, heh?

This country (none / 0) (#13)
by SOS on Fri Mar 13, 2009 at 01:28:02 PM EST

who's entire industrial system makes Sinclair's The Jungle look like kindergarten in comparison is lecturing us?

Is it their industrial system... (none / 0) (#15)
by kdog on Fri Mar 13, 2009 at 01:31:53 PM EST

or our labor pool? It's like we read "The Jungle", got a little bothered by it, and moved the jungle overseas instead of dismantling the jungle...out of sight, out of mind.

Or the world is the jungle and that's the way it's always gonna be...join the hunters or the hunted.


We're not responible for (none / 0) (#16)
by SOS on Fri Mar 13, 2009 at 01:35:01 PM EST

their problems. Americans are sick and tired of being poisoned by their toxic products and attitudes.


: As long as we keep buying... (none / 0) (#22)
by kdog on Fri Mar 13, 2009 at 01:50:00 PM EST

their sh*t we are partly responsible for the conditions SOS.
The toxic attitudes are on both sides of the Pacific...is it not a toxic attitude to run to Walmart to buy the cheapest Chinese plastic piece of sh*t on the market?

dean baker (none / 0) (#21)
by Jlvngstn on Fri Mar 13, 2009 at 01:45:32 PM EST

had this posted at 7 a.m. this morning. Are you two sharing the same thoughts?

IMHO (none / 0) (#35)
by SOS on Fri Mar 13, 2009 at 02:30:17 PM EST

China is cooked. 100% certain. The question of when is a different story.

Level of debt is unsustainable = someone is going to eat it.

A little twist of the screws, (none / 0) (#43)
by SOS on Fri Mar 13, 2009 at 02:52:11 PM EST

Mr. Wen? I know, its all in good fun. That huge drop in exports has gotta tighten your sP hinc ter, labor rio ts, and all.

We are at the end of money (none / 0) (#45)
by Dadler on Fri Mar 13, 2009 at 03:15:49 PM EST

It is over as we knew it. Whether we or the Chinese or anyone else realizes it, all things come to an end, entropy, and money is there. The entire paradigm is fetid and decaying, and the quicker we adopt a new paradigm (largely aimed at national self-sufficiency and unheard of generoisty) the better. If we don't, expect a die off of human beings never seen before. The Chinese don't need our market anymore than we need there's, unless we are still going to operate on the "wild wealth is just around the corner for me!!" paradigm that infects all economics. The Chinese could survive and prosper if they simply took care of themselves and their own people's needs, just like we could, just like almost everyone could. We like "trade" not because it is necessary, but because it makes a few people rich and one day it might make us rich, too. So we ignore all the problems and cancers and just keep fiddling while America burns. Because one day we could be one of those we now despise and ridicule.

: Don't fearmonger (5.00 / 1) (#53)
by MrConservative on Fri Mar 13, 2009 at 04:02:00 PM EST

We've reached this level of debt as % of GDP before and been just fine.
http://bbs.chinadaily.com.cn/attachments/month_0707/debt_gdp_D8uXxCEYDJX3.png

: And who do you think.... (none / 0) (#48)
by Dadler on Fri Mar 13, 2009 at 03:24:52 PM EST

...the Chinese government a more like, Dems or Repubs?
Hint: it ain't the party of the New Deal. Can't have a New Deal when a foreign country controls too much of your debt, especially a foreign power that isn't afraid or intimidated by you at all.
We. Are. Screwed.

Upcoming G-20 Meeting (none / 0) (#49)
by santarita on Fri Mar 13, 2009 at 03:28:59 PM EST

Geithner is in Europe meeting with the finance ministers to plan the agenda for the April meeting.

The US wants other countries to provide stimulus packages like ours to jump start the world economy. Other countries want the US to submit to international financial regulation. In addition the management of the IMF is now in play.

China is reminding the US that it has a lot of power.

Meh. (none / 0) (#51)
by sweetthings on Fri Mar 13, 2009 at 03:32:20 PM EST

If they're worried, they can sell them. Otherwise, they can sit down and be quiet.

perhaps, (none / 0) (#63)
by cpinva on Fri Mar 13, 2009 at 10:16:37 PM EST

just a hint to stop bugging them about that whole "human rights" nonsense?

China is very immature. (none / 0) (#67)
by KoolJeffrey on Fri Mar 13, 2009 at 11:44:19 PM EST

China is not used to the spotlight when flexing its financial power. They normally operate under the radar in a more passive-aggressive manner (i.e., floating their currency along with the dollar). I think they sense that global conditions are forcing more attention on them, and the self-immolating nature of these comments indicate their lack of experience.

well (none / 0) (#68)
by connecticut yankee on Sat Mar 14, 2009 at 12:19:11 PM EST

When you put nuclear weapons on your credit card it's hard for the collections agency to complain much.

Narcissism or Pragmatism (none / 0) (#69)
by dlgreene3304 on Sat Mar 14, 2009 at 12:40:53 PM EST

In all that China does and ever says... is a self-serving agenda. Having the Chinese for friends, is like keeping a pet rattlesnake. If Obama's 'stimulus' doesn't kick-start a generation of 21st century economic growth, reversing the negative impact of globalization; US GDP will never overtake the escalating debt burden. We came out of WWII with a debt to GDP ratio of nearly 200% and paid it back in two decades of explosive growth. The self-serving Chinese, who fear any revision of the globalization equation, will oppose any shift toward US economic self-sufficiency and sustainability. Congressional calls for 'restraint', from folks who are clueless, are a prescription for economic disaster; playing into this (Chinese) agenda.