Daily Finance: China/US - Obama's leverage in China negotiations limited by massive U.S. debt
With that level of U.S. debt in its hands, China holds most of the cards. If China started dumping that debt, the value of the U.S. dollar would fall dramatically. China knows it's in the stronger position, as evidenced by its recent decision to ignore the IMF as it continues its stimulus programs. So no matter who was sitting at the table representing the U.S., they wouldn't have much ability to move the Chinese. China flexed its muscles almost as soon as President Obama arrived. Obama held a town hall meeting for more than 400 Chinese university students, which was supposed to have been televised. But at the last minute, China pulled the plug and the event was not carried on state television. Further, to make the statement that it's not interested in discussing human rights, China rounded up dissidents before Obama's arrival. Clearly, China is sending the signal that human rights will not be one of the issues to be negotiated.
For the Chinese, the biggest issue on the table will be the U.S. deficit and their biggest question will be how President Obama plans to get it under control. China has a big stick it can wield if it doesn't like the answers. If China stops buying U.S. debt, most of President Obama's plans -- such as health care reform -- would have to be shelved until the U.S. finds another lender.
Note EU-Digest: The EU should look at this visit by Obama to China as a "case history" and not make the same mistakes as the US in dealing with China.
Labels: China, Economic Crises, EU, US
