China is getting a little worried

Today’s lead article in The New York Times was titled, “China’s Premier Seeks Guarantee from U.S. on Debt.” The article described the concern of the Chinese premier, Wen Jiabao, about the country’s $1 trillion of holdings in U.S. government debt.

This criticism follows remarks in January about the folly of America’s low savings and high rate of consumption.

However, we shouldn’t be concerned, paradoxically because the Chinese hold so much of our debt. If they tried to unload it all, the value of the Treasury notes would decrease precipitously, and China would sustain a big loss. The article concludes that the Chinese would have to hold their Treasury notes until maturity.

One of the apparent criticisms of U.S. policy, and by the Europeans as well, seems to be our emphasis on stimulus programs instead of stricter regulation of banks and other financial institutions.

While it’s nice to know that the Chinese, one of the world’s strongest economies, is bound to us in a circle of mutual dependency, it leaves us feeling very vulnerable as well. Americans are used to going it alone, to consider our own national security without relying on any other nation. An inability to do so suggests a decrease in our power and that’s troubling to many of us.

How can we serve as a beacon of light and a city on the hill, when we have to be careful what we say about other countries. For example, many policy experts believe that today’s Chinese criticism was a response to our earlier criticism of the way they manipulate their currency.

This is a fine mess that Mr. Bush has gotten us into.