China to US: 'We own you'
The inevitable has happened. China has sent a very serious message to the US. It warns that the spending policies of the US Government cannot offend the Chinese authorities. Doing so will risk more financial uncertainty.
BEIJING – China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.
Premier Wen Jiabao's message is unlikely to be misunderstood at the White House. It is counting on Beijing to help pay for its stimulus package by buying U.S. bonds. China already is Washington's biggest foreign creditor, with an estimated $1 trillion in U.S. government debt. A weaker dollar would erode the value of those assets.
The Chinese Premier went on to say:
"Without China's buying (Treasuries) and continuing to fund U.S. deficit spending, interest rates could have been much higher. That could be very destabilizing in this very recessionary environment,"
I am struck by the irony of the communist regime in China is now cautioning Obama about being overly socialist.