Monday, March 16, 2009

Honest, boss: we're good for it

When your biggest creditor demands assurance that you will meet your obligations, what do you do?

You tell them what they want to hear, of course:

The White House has reassured China that its $2 trillion stockpile of US investments are safe, despite the global economic crisis.

Robert Gibbs, a spokesman for Barack Obama, the US president, said on Friday: "There's no safer investment in the world than in the United States."

Gibbs was responding to comments by Wen Jiabao, China's prime minister, who voiced concern over the outlook of US government bonds, calling on Washington to ease worries about US assets.

Speaking at his annual news conference on Friday, Wen expressed concern that massive US deficit spending and near-zero interest rates could erode the value of China's bond holdings.

China is the biggest holder of US government debt and has invested an estimated 70 per cent 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," Wen said.

"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."

And if you don't think China's new status as our financial big brother isn't going to have repercussions for US foreign policy, you haven't been paying attention to the continuing naval confrontation in the South China Sea.

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