Will China Still Bankroll Us?

David Leonhardt writes on and U.S.-China economic relations for the New York Times:

In the five months since Barack Obama introduced him as the next Treasury secretary, Geithner has already run through what seems to be a career’s worth of images: the brilliant technocrat whose appointment caused stocks to soar; the neophyte public figure who flopped in his debut; the regulator who has grown too close to Wall Street; the Obama adviser with the same unflappable nature as his boss. One image that hasn’t yet attached itself to him, however, is his original professional image. By training, Tim Geithner is a China hand. And though the immediate financial crisis is likely to dominate his tenure at Treasury, the economic relationship between the United States and China may ultimately prove just as important. It could be crucial to preventing the next crisis.

Geithner […] mentioned reading an old newspaper interview with Michel Camdessus, the head of the International Monetary Fund in the 1990s. Camdessus’s tenure included the Asian financial crisis and Mexican peso crisis, and some European leaders were unhappy about the extent to which the I.M.F. followed the advice of American policy makers, Geithner among them, in managing these crises. Geithner recalled that when the interviewer asked about this, Camdessus replied that America had influence disproportionate to its weight in the institution only when it had an idea others were willing to follow. The Camdessus strategy — make sure you have an idea worth following — will be the Treasury Department’s approach to China.

The strategy actually dates to the Bush administration and a series of meetings with Chinese leaders that Henry Paulson, Geithner’s predecessor, helped set up. If Obama’s advisers admire one aspect of President Bush’s — and coming up with another isn’t easy — it’s the effort to nurture a relationship with China. The meetings, which began in 2006, were called the Strategic Economic Dialogue. For the first sessions, Bernanke accompanied Paulson as a demonstration of respect to the Chinese and a sign of how seriously United States viewed the agenda. American and Chinese officials are now negotiating the logistical details of the next round of the dialogue, which will be jointly led by Geithner and Clinton. Internally, officials from State, Treasury and elsewhere in the administration have been jockeying for influence over China policy. But they all seem to agree that one of the main goals of the dialogue is to bring a wide variety of important Chinese officials — including those who represent industries and regions that have benefited from the imbalances — into the same room for the talks.


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