Clinton: China Must Continue to Invest in U.S. Bonds

points out that U.S. and China are on the same boat and they are going to rise or fall together, via the Washington Post:

Secretary of State Hillary Rodham Clinton on Sunday urged China to keep investing its substantial foreign-exchange reserves in U.S. Treasury securities, arguing “we are truly going to rise or fall together.”

China is the biggest foreign holder of U.S. debt, which helped finance the spending binge the United States went on before the current economic crisis. Some experts have expressed concern that China’s substantial holding of U.S. debt gives it increased leverage in dealings with Washington because any halt in Chinese purchases would make it more difficult to finance the government bailout and stimulus packages.

Associated Press reports on the same issue via boston.com:

“I certainly do think that the Chinese government and central bank are making a smart decision by continuing to invest in Treasury bonds,” Clinton said in the interview, shortly before departing for Washington. “It’s a safe investment. The United States has a well-deserved financial reputation.”

To boost the economy, the U.S has to incur more debt, she said. “It would not be in China’s interest if we were unable to get our economy moving,” Clinton said. “So by continuing to support American Treasury instruments, the Chinese are recognizing our interconnection. We are truly going to rise or fall together. We are in the same boat and, thankfully, we are rowing in the same direction.

February 22, 2009 9:02 AM
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