Stakes are high for U.S., China during Clinton visit
When Hillary Clinton visits Beijing this week, her Chinese hosts will closely watch her body language and parse her every word. Her first trip here as the U.S. secretary of state comes in the shadow of the global financial crisis, the pressing North Korea nuclear issue and a warming planet.
The U.S. Congress has passed a massive stimulus bill that will plunge America even deeper into debt. Will China help out?
About $700 billion of China’s $1.9 trillion of foreign reserves are in U.S. Treasuries. If China sold those assets, U.S. interest rates would spike and would further decimate China’s export industries. Such a scenario would be distasteful for both Washington and Beijing, and that’s why it’s critical that Clinton convince the Chinese to hold this arrangement together.
Why should China buy even more?
“There’s some protectionist language in the stimulus package,” said James McGregor, who runs JL Mcgregor & Company, a business consulting company in Beijing. “During the campaign, Hillary called on the president (George W. Bush) not to attend the opening ceremony of theBeijing Olympics. China doesn’t know what to think of them. She’s got to come here to build trust.” The stakes are high for America. 
Watch how economic concerns will be a focus of talks »
“I think if China sits out a treasury auction, what happens to the American economy? What happens to the American stock markets?” McGregor asked. “China is now in a position of power when it comes to American finances.”
What do Chinese expect to hear from Clinton? Victor Gao, director of China National Association of International Studies, hopes America’s top diplomat can “assure the overseas investors, including China, that their investments in these securities will be protected.” He believes China will ask Clinton to keep the U.S. dollar as strong as possible and keep it from depreciating.
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For its part, Gao said China “will not do anything irresponsible” with the bulk of U.S. Treasury bills it holds “because the interests of the Chinese and American economy are now very much intertwined.”
McGregor agreed: “China already owns so much American debt that they cannot afford not to have America be successful.”
The Chinese also hope Clinton will help mute the protectionist voices in the United States. “It’s time for the U.S. to demonstrate that it will continue as the champion of free market and free trade,” Gao said. “If anyone wants to equate patriotism with protectionism, that’s the wrong recipe.”
“Things are going to be very, very different from now on between the United States and China,” said Michael Santoro, author of the book, “China 2020.”
The established relationship between the two nations — China selling products to the United States, and then Beijing buying up U.S. debt — needs to change, Santoro said. Watch Santoro explain how the U.S. and China need to build a new relationship »
Much more is at stake. Barack Obama has identified the relationship with China as one of the most important foreign-policy issues of his administration…
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Posted by John Malloy
on Feb 20 2009. Filed under Barrie, Collingwood, Owen Sound, Stayner, Thornbury, Wasaga Beach.
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“Human rights cannot interfere with the global economic crisis, the global climate change crisis and the security crises,” Clinton said in talks with China’s foreign minister.
Tell that to the people that have no rights Clinton. They don’t care if a bunch of rich people are loosing money. And if Global Warming is going to be in front of any of these other issues we have lost our way to the biggest scam in history.
Global warming will be the down fall of this administration.
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