I am pretty sure that most Chinese speak better English than he speaks Chinese. Or French. Or German.
Or English, if it comes to that.
maybe this is what the ment
It makes you wonder if U.S. citizens understand the extent to which Asians subsidize their way of life. Japan and China are the two biggest holders of U.S. debt, owning a combined $832 billion. Add in Hong Kong, Singapore, South Korea, Taiwan and Thailand and the figure grows to $1.04 trillion out of $1.75 trillion of Treasuries held overseas
Bloomberg Columnists
William Pesek Jr. William Pesek Jr. is a columnist for Bloomberg News. The opinions expressed are his own.
China Role Likely in U.S. Election: William Pesek Jr. (Correct)
China Role Likely in U.S. Election: William Pesek Jr. (Correct)
(Corrects typographical error in 12th paragraph. Commentary. William Pesek Jr. is a Bloomberg News columnist. The opinions expressed are his own.)
By William Pesek Jr.
July 30 (Bloomberg) -- Bill Clinton tried to jam lots into his speech at this week's Democratic National Convention. And yet, somehow, the former U.S. president found time to mention China's purchases of U.S. Treasuries.
Clinton did so while criticizing the Bush administration for turning a ``projected $5.8 trillion surplus into a projected debt of almost $5 trillion,'' a record.
``They are borrowing the rest from foreign governments, mostly Japan and China,'' Clinton said in Boston. He added that ``if you think it's good policy to pay for my tax cut with the Social Security checks of working men and women, and borrowed money from China, vote for them. If not, John Kerry's your man.''
It makes you wonder if U.S. citizens understand the extent to which Asians subsidize their way of life. Japan and China are the two biggest holders of U.S. debt, owning a combined $832 billion. Add in Hong Kong, Singapore, South Korea, Taiwan and Thailand and the figure grows to $1.04 trillion out of $1.75 trillion of Treasuries held overseas.
Clinton's China reference is a harbinger of things to come. As U.S. Democratic nominee Kerry steps up efforts to unseat President George W. Bush, it's likely China in particular will play a central role. Already, Kerry raised eyebrows accusing China of ``predatory currency manipulation.''
China's Holdings
Will China's vast U.S. debt holdings become an issue, too?
They will if U.S. Congressman John Tanner, a Tennessee Democrat, gets his way. ``There has never been a nation that was strong, free and bankrupt,'' Tanner said at the convention. He's one of the so-called Blue Dogs, a group of moderate-conservative Democrats urging fiscal discipline.
There's more than a bit of hyperbole here. Yet Tanner isn't alone in worrying that growing holdings of U.S. Treasuries by foreign nations like China are a threat to national economic security. At a time when Kerry's campaign is calling for an end to U.S. dependence on Middle Eastern oil, it may also turn its attention to the unhealthy reliance of the U.S. on Asia's money.
Concerns that foreign-debt ownership is a vulnerability may be overdone, but they could get considerable attention between now and November, when U.S. voters cast ballots. It will hardly be good news for U.S.-China relations, or investors for that matter, trying to discern the broader implications of all this.
At the center of the issue is China's currency policy. If there's any economic policy on which Kerry and Bush agree, it's the desire for a stronger Chinese currency. Both Democrats and Republicans think China's 8.3 peg to the U.S. dollar gives Asia's second-biggest economy an unfair advantage.
A Loser Yet the ``blame China'' strategy is a loser, at least where currencies are concerned. There's plenty to criticize China about, including its human rights record and aversion to free speech. If Kerry and Bush want to go after China's economic policies, its record on intellectual property rights offers lots of ammunition. So does the lack of transparency in his financial sector.
China would unleash its currency if it could. Doing so would instantly raise Chinese wealth, get Washington off its back and, most importantly, help cool an overheating economy. China is desperate to avoid a crash, and a 30 percent or 40 percent rise in the yuan could be just the trick. It also would reduce the cost of imported oil and other commodities.
Officials in Beijing are avoiding the step because they know the underlying financial system isn't ready for it.
The Peg Shield Still, both Kerry and Bush will be under increasing pressure from manufacturers to bully China into floating its pegged currency. Trouble is, freeing the yuan would mean a major loss of control, and China's economy is all about control. A pegged yuan shields China from the full wrath of global markets. China's biggest banks aren't really banks, but arms of the government that pump liquidity into state-run enterprises and development projects. The result is untold numbers of bad loans.
As China slows its economy, curtailing investment and consumption, things may only get worse. Officially, bad debts make up 20 percent of loans outstanding at China's four biggest state-owned banks. Many private-sector analysts believe the figure to be much higher. Standard & Poor's recently called China's banking system the world's most vulnerable and predicted it would cost $650 billion to bail it out.
If the yuan is floating freely and investors begin speculating that banks are even worse off -- plausible given the lack of transparency -- that's the ballgame for China, and officials in Beijing know it.
Still, as Clinton's reference to China subsidizing the U.S. suggests, the world's No. 7 economy won't get off the hook this election season. Its dollar peg still unnerves U.S. manufacturers. And now, its vast dollar holdings -- it needs to buy U.S. Treasuries to hold the currency steady -- are attracting attention.
Investors caught in the middle could be in for an interesting few months.
To contact the writer of this column: William Pesek Jr. in Tokyo at wpesek@bloomberg.net