A few days ago it was reported that the Chinese Premier, Wen Jiabao, expressed concern about the safety of its U.S Treasuries.
China is the largest foreign creditor to the United States and at a news conference Premier Wen Jiabao said
“We have made a huge loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried.
“I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”
I don’t get it. If Jim owed me money and I was worried about his ability to repay the debt, the last thing I would do is spread my concerns about Jim around town. If Jim was in trouble before I said anything, then for sure his ability to keep trading and making money is not going to be helped by my expressing doubts about his solvency.
As background, China is now the biggest foreign creditor to the U.S. being in for approximately 22% of U.S. debt. Japan is not far behind and overall approximately one half of the $3 Trillion of U.S. debt is owed abroad.
I don’t think for one moment that the Chinese Premier’s words were said unthinkingly. So what did he hope to gain?
If I believed China wants to bring the U.S. to its knees then I could see the logic of his statement. That is provided that China is prepared to bite the bullet and suffer the loss of the value of its foreign loans. But if China wants to prosper in a world that includes the U.S., then what was his motive? It beats me.
{ 2 trackbacks }