Beijing holds the cards

PUBLISHED : Friday, 05 June, 2009, 12:00am
UPDATED : Friday, 05 June, 2009, 12:00am

The tone and nature of US Treasury Secretary Timothy Geithner's maiden trip to China was markedly different from the visits by his predecessor, Henry Paulson.

Heated talk of the valuation of the yuan and trade imbalances was set aside for praise and hopes for a co-operative relationship. Beijing, not Washington, now holds the cards. That was apparent in the statements issued after Mr Geithner met President Hu Jintao and Premier Wen Jiabao on Tuesday. The Chinese leaders exuded confidence. The American thunder of old was replaced by a willingness to please.

China was on the world stage beside the US and being treated as a friend and equal. This is how the relationship should be. The world's leading developing and developed nations should work closely together. Each has an advantage in helping to resolve global challenges. This cannot happen effectively without a partnership.

America's economic woes are largely driving the shift. Trillions of dollars of foreign goodwill is being used to fund US President Barack Obama's efforts to pull his country out of the financial chasm it has fallen into.

China is the biggest foreign owner of US Treasury bonds. As of March, it held US$768 billion of such debt. Beijing's US-denominated government and corporate paper investments could well be twice that amount.

Mr Geithner's visit was not to negotiate deals or sign pacts. His main goal was to assure Beijing that his country's monetary policy and ballooning deficit would not undermine the value of the US dollar and paper bonds.

Trust, respect and co-operation are key. Understanding is essential to building a sound working relationship. China and the US are equally influential nations. They share common interests and goals. Both sides have to be open and transparent.

The above article is an edited version of the editorial which appeared in the South China Morning Post on Wednesday