In response to Wen Jiabao’s unease at the safety of China’s U.S. Treasury holdings, the White House has sought to reassure China. From Bloomberg:
“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said yesterday at a briefing in Washington.
Gibbs was responding to comments from Wen that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said at a press briefing in Beijing.
President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of U.S. debt sales to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. Investors abroad own almost half of all U.S. debt outstanding, and China last year overtook Japan as the biggest foreign buyer.
Wen’s comments contributed to a decline in Treasuries yesterday. Yields on benchmark 10-year notes rose as high as 2.96 percent, from 2.85 percent a day earlier, and closed at 2.89 percent.
U.S. President Obama has also responded to China’s worries. From Reuters:
Obama also sought to reassure China, which expressed concern on Friday that massive U.S. deficit spending and near-zero interest rates would erode the value of China’s huge U.S. bond holdings.
“There is a reason why even in the midst of this economic crisis, you’ve seen actual increases in investment flows here in United States,” he said. “I think it’s a recognition that the stability not only of our economic system but also our political system is extraordinary.”
“Not just the Chinese government but every investor can have absolute confidence in the soundness of investments in the United States.”
