Geithner Tells China Its Dollar Assets Are Safe (Updated)
U.S. Treasury Secretary Timothy F. Geithner arrived in China this week seeking to reassure America’s biggest creditor that its hundreds of billions of dollars of holdings in U.S. government debt remain safe.
Responding to remarks by Chinese officials in recent months about their nervousness over the value of U.S. Treasury securities, Geithner said he remains committed to a strong dollar and pledged that the United States would cut its fiscal deficit and eliminate “the extraordinary government support” that had been put in place to overcome the crisis.
“The United States is committed to a strong and stable international financial system. The Obama administration fully recognizes that the United States has a special responsibility to play in this regard, and we fully appreciate that exercising this special responsibility begins at home,” Geithner said in a speech at Peking University on Monday.
Geithner’s speech was entitled “The United States and China, Cooperating for Recovery and Growth.” Read below for an excerpt of the speech. The full text can be found at the U.S. Department of the Treasury website, as well as at the Wall Street Journal’s “China Journal“:
As we address this immediate financial and economic crisis, it is important that we also lay the foundations for more balanced, sustained growth of the global economy once this recovery is firmly established.
A successful transition to a more balanced and stable global economy will require very substantial changes to economic policy and financial regulation around the world. But some of the most important of those changes will have to come in the United States and China. How successful we are in Washington and Beijing will be critically important to the economic fortunes of the rest of the world. The effectiveness of U.S. policies will depend in part on China’s, and the effectiveness of yours on ours.
Although the United States and China start from very different positions, many of our domestic challenges are similar. In the United States, we are working to reform our health care system, to improve the quality of education, to rebuild our infrastructure, and to improve energy efficiency. These reforms are essential to boosting the productive capacity of our economy. These challenges are at the center of your reform priorities, too.
A different look at the speech, from Kang Juan for the English Global Times. “Geithner’s Assurances Fall on Deaf Ears“:
His assurances, however, fell on some deaf ears as he failed to offer definite proof, and various Chinese scholars interpreted the words as merely a “good attitude,” given that they didn’t offer a concrete solution to the current trade and economic disputes.
“Chinese assets are very safe,” Geithner said in a speech yesterday, renewing a pledge that the Obama administration will control the country’s rising national deficit. China is the largest creditor to the US, which raises fears that the bonds purchased by China may lose value if economic struggles in the US continue.
Geithner’s assurance even drew laughter from the primarily student audience at Peking University, where he studied Chinese in the 1980s, reflecting skepticism in China about the government’s huge holding of US government debt, which has this year handed investors their worst loss since 1977 on forecasts of a ballooning deficit. [above image: "US Treasury Secretary Timothy Geithner (right) holds up a photo of himself taken years ago during his studies at Beijing University."]