In forthright remarks on the intertwined nature of US and Chinese finances, Wen told a news conference he was “worried” about Beijing’s holdings of American government debt. Analysts believe China has $1trn (£716bn) of US treasury bills in its coffers, implying a delicate balance between two powers whose fortunes are interlinked.
“We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” In rare comments on another country’s financial health, he added: “I’d like to take this opportunity here to implore the United States … to honour its words, stay a credible nation and ensure the safety of Chinese assets.”
I’m worried too Wen.
McClatchy Newspapers) adds this:
Still, Wen’s criticism reflects a misunderstanding of China’s own risks. In questioning the U.S. ability to make good on its debts, China threatens to undermine the value of the very assets it’s holding.
“In a formal sense, China has lent money to the United States because they bought our Treasury paper … but in reality China is holding its international reserves, its international cash, in the safest place possible because that is in its best interests,” Keidel said of China’s dollar reserves. “The U.S. has a long track record of financial responsibility to guard against the kind of inflation that would threaten” China’s holdings.
The flap over Wen’s remarks also underscores how interconnected the world’s two economic engines have become.
“It shows us how interlinked our economies are and long term, if China did start selling Treasuries, it could be hurting itself, since the value of the rest of the Treasuries could go down,” Schrage said. “We’re really in the same boat on many of these issues.”