Buddy from the East

China watches nervously as the US gets closer to default date

China has been compared to many things stereotypical: “a fiery dragon waking from its long sleep,” “a skyward-reaching bamboo growing towards prosperity,” and “a fortune cookie telling an everlasting fortune.” Okay — maybe I made up the last one. But many economists speculate too often that China’s market is on a meteoric rise. Although this prediction may be true, the recent debt debates blowing across Capitol Hill have presented themselves as a Great Wall for China.

China, our country’s largest foreign debt holder, with U.S. Treasury security holdings of about $1.16 trillion, is watching anxiously as we inch ever closer toward raising the debt ceiling. With $14.3 trillion of federal debt, the U.S. has only until the deadline of August 2 to find a suitable plan. Otherwise, we default, and China has a panic attack. That’s the last thing China wants. NPR reports that “China has been using diplomatic channels to express its concern. It has sent several official demarches urging Washington to abide by its financial commitments.” Indeed, China is showing its stress wrinkles, but it would be the U.S. developing bruises if we were to betray our national interest. Investors would think twice about investing in our nation again.

Our relationship with China is already on a thin thread — ever since we sold military arms to Taiwan last year, met with the Dalai Lama, disagreed with China’s heinous human rights policies, called their weapons-building “non-defensive,” charged them with heavyweight cyber-world hacking, and decried their trade abuses and currency depreciation. Oh, and calling China things like the “fiery dragon” doesn’t help either. So I’m not surprised that China is slightly irritated with us. But this economic default hot potato may just be the straw that breaks the camel’s back.

To us, China is a frenemy. They want to muscle us out as the top superpower, but they need our economy to be running smoothly. A severe economic stagnation for the U.S. means the same for China. Additionally, Beijing has very few options, according to Professor Patrick Chovanec at China’s Tsinghua University. “By and large, [China] is stuck holding Treasuries and, in fact, they’re stuck buying more because it’s embedded in their growth model. There are no markets that are as deep and liquid as the U.S. Treasury market for them to put all their dollars.” China’s market feeds off the U.S.

If you need more evidence, just run into a Disney store in China. The stores there are turned into English-language workshops for kids. Pearson PLC, the learning company, is buying 39 English schools in seven cities for $145 million. Pearsons predicts the language export to be an ever-expanding market.

Despite the rough past, the U.S. is beginning to see the Big Red Panda eye-to-eye. Recently, U.S. Chairman of Joint Chiefs of Staff Mike Mullen met with the People’s Liberation Army General Chin Bingde. They toured each other’s military facilities as a sign of trust. Mullen displayed his Predator drone and a live-fire exercise. Bingde showed his Su-27 jet fighter and a counterterrorism exercise. This playground exchange may seem inconsequential, but it could actually be groundbreaking. Military relations with China may finally gloss over icy tensions, and trust-building may begin.

An exemplar of trust-building is the U.S. engagement of China in talks of their outer space programs. In 2008, a U.S. military missile shot down a disabled U.S. spy satellite, reasoning that it may be a threat to certain regions. This action drew speculation from China. A year later, China hit one of its own antiquated weather satellites with its own missile, and the Pentagon mirrored the speculation right back. Currently, China is developing many defense technologies, including jammers and lasers for their military space sector. If the U.S. is successful in hashing out agreements for space armament, China and the U.S. are off to a great start in mending military ties.

Not much is certain about how our debt dithering will turn out. China will just have to watch from the sidelines. Nonetheless, the precedent has been set — our military ties with China have been renewed. Only time will tell whether this Shangri-La of mutual peace will maintain.

Editor’s note: Due to editorial deadlines, this column includes speculation about the resolution of the Congressional negotiations on the federal debt that were concluded August 2.

Marcus Aurelius over 12 years ago

We may view military exchanges with China as a trust-building measure, but the Chinese view it as an opportunity to spy.

China would also likely abrogate, without notification, any treaty concerning weaponization of space. They would view that it would be advantageous for them to do so, because they would conclude, quite correctly, that the US honors its treaty commitments more seriously than they do.

It's true that our arms sales to Taiwan, comments about human rights abuses in China, meetings with the Dalai Lama, and our own fiscal profligacy, etc. "doesn't help" Sino-US relations, but that's sort of like saying that sanctions against Iran doesn't help Iran-US relations. Yeah, no duh.

Good relations with other countries are not ends in themselves, but a means to promoting freedom and peace. The US is not alone in looking askance at China's rise. Japan recently released a white paper highlighting the threat from China. China is locked in maritime disputes with Vietnam and the Philippines. China has also tried to put "facts on the ground" in disputed territory with India.

To say nothing about China's unfair trade practices, which our own leaders have been admittedly too timid to address effectively.

Until China begins to exercise good global citizenship, there is no reason why we should be overly concerned with how warm and fuzzy China says it feels about us. They know there are people in this country who view pleasant diplomatic tone as an end-all be-all and are leveraging that against us.

This being said, the US response to China's rise has been remarkably tame, to the point where our Asian allies are wondering about our commitment to preserving stability in the region. Weakness is provocation.

Lucius Annaeus Seneca over 12 years ago

Weakness is indeed provocation. Which is why China is developing weapons to cover such weaknesses. The US does not need to be committed to "preserving stability" in Asia. The instability is caused by the US not minding it's own business; the US is not giving the region its freedom to determine its own destiny and denying them fundamental rights.

Every country wants more land; don't act like the US has no border disputes: http://en.wikipedia.org/wiki/List_of_territorial_disputes#Territory_disputed_between_Canada_and_the_United_States

I won't even mention the unfair trading going on at Wall Street. Get your own shit together before hating on others. Hating is also a sign of weakness, and such a sign of weakness and minding other people's businesses are not approved by the real Markus Aurelius.

Any country on the rise means that they improved something; learn to get better yourself rather than trying to bring others down (ex: Iraq War).

LOL US ever being a good global citizen. Fuck the popo who try to bully other countries! Let's face it, other countries either become the US's bitch or become an "enemy". US just need to legalize weed and chill.

I don't know why people think the Dalai Lama is a good guy. He is the opposite of true buddhism, which discourages politics and encourages inner peace. He just twists religious doctrines to advance his own religious agenda. Real buddhists and average Tibetan citizens are good people who do not appreciate this theocratic demogog. Tibet was a slave state before the Communists liberated the average people and crushed the ruling monk class. Same people supporting Tibetan freedom today would be insupport of Southern freedom during the US Civil War. Civil was happen; ain't nobody in Asia gave a damn about your civil war, so let us handle our own. When y'all stepped in the Vietnam war, y'all committed the worst atrocity ever with the Agent Orange incident. Thanks a lot for "preserving stability" aka slavery, racism, and genocide.

Not On Weed over 12 years ago

It is highly doubtful that China has the goal of "giving the region its freedom to determine its own destiny." Get real. Given a free hand, do you think China would let Taiwan determine its own destiny? They've been salivating at that new naval base from which to launch their conquest of the Pacific. Not to mention Vietnam, India, the Philippines, South Korea, etc. all casting a wary eye to a re-emerging Middle Kingdom.