The US-China tight rope
Tuesday, March 17, 2009 at 3:34AM ARTICLE: China's Leader Says He Is 'Worried' Over U.S. Treasuries , By MICHAEL WINES, New York Times, March 13, 2009
The key paras:
The Chinese government faces a difficult dilemma. If the United States government borrows less and engages in less fiscal stimulus, this could help prevent interest rates from rising in the United States and would preserve the value of China's existing bond holdings.
But less government spending in the United States could also mean a slower recovery for the American economy and reduced American demand for Chinese goods. The United States imported 17.4 percent less from China in the first two months of this year compared to the same period last year, contributing to a record drop in Chinese exports that is braking the entire Chinese economy.
The interdependency here is very real. That's why anything that smacks of economic retaliation would be considered very aggressive.
(Thanks: Kevin McCullough)
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