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

Glenn Kessler:

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.

Clinton, in unusually direct comments on an interview with China's Dragon TV before returning to Washington, said that reality made it an imperative for China to keep purchasing U.S. Treasury bonds, because otherwise the U.S. economy will not recover and China will suffer as well.

"Our economies are so intertwined," she said. "The Chinese know that in order to start exporting again to its biggest market . . . the United States has to take some drastic measures with the stimulus package. We have to incur more debt."

It will be interesting to see how splurge/stimulus money is spent by local school districts. Perhaps we should spend more time on Mandarin?

Posted by Jim Zellmer at February 22, 2009 4:48 PM
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