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Offline ms

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  Obama to Borrow China’s Wealth, Clout in Effort to Steady World
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By Indira A.R. Lakshmanan

Dec. 9 (Bloomberg) -- Thirty years ago this month, President Jimmy Carter held secret negotiations to establish formal diplomatic ties with a poor, insular communist China. President-elect Barack Obama will inherit a relationship with a China whose wealth and influence are essential to rescuing the world economy.

Resolving almost any international problem now -- from reducing North Korea’s potential nuclear threat to slowing global warming -- requires Beijing’s cooperation. The financial crisis also underscores China’s importance: Its $1.9 trillion in foreign reserves will be indispensable in helping to avert a global economic meltdown.

While this means China will likely get immediate attention from Obama, the new president probably won’t reorient U.S. policy toward the world’s fourth-largest economy.

Factory closures and job losses in Michigan and China’s Guangdong province “vividly remind us how interdependent our countries are now,” says Susan Shirk, a former deputy assistant secretary of state for China who has advised both Obama and Hillary Clinton his choice for secretary of state. “Although this could lead to conflict and friction, it also gives the U.S. a strong incentive to cooperate with China.”

Every president since Carter has come to office lambasting Beijing about espionage, unfair trade practices, violations of human rights and threats to Taiwan -- before being compelled to work with the Chinese government on common interests.

Less Confrontation

Obama may be the first to start out less confrontationally. During George W. Bush’s presidency, the two countries have forged unprecedented lines of communication, forming working groups on Africa and Latin America and holding economic summits like one last week with Treasury Secretary Henry Paulson.

The current administration “has handled the U.S.-China relationship perhaps better than any bilateral relationship of the last seven years,” says Ken Lieberthal, a former national security adviser on Asia under President Bill Clinton who advised Hillary Clinton, 61, and then Obama, 47, during the presidential campaign.

Even so, “mutual distrust about both sides’ intentions has grown,” says Lieberthal, 65, a visiting scholar at the Brookings Institution in Washington.

Thwart Growth

On a recent trip to Beijing, he says he discovered that many Chinese -- officials and ordinary citizens -- believe the U.S. purposely triggered a global financial crisis to thwart China’s growth. Likewise, many Americans assume a stronger China would marginalize the U.S.

“Each side hedges against what they fear the other might try to do,” Lieberthal says.

As economic conditions worsen, both countries are under pressure at home to protect their domestic markets. Obama spoke out during the campaign against what he called unfair trade practices and currency manipulation, which has left Chinese policy makers nervous about his intentions. China, meanwhile, is shielding its own economy by slowing the appreciation of the yuan against the U.S. dollar and giving Chinese exporters a larger tax rebate.

With the U.S. now officially in a recession, China holds more cards than it did even a few months ago. Washington is more reliant on Beijing -- the largest holder of U.S. Treasuries -- to buy more government securities to finance deficit spending. China’s massive trade surplus has enabled it to accumulate more foreign-currency reserves than any other nation, according to Bloomberg data.

‘A Lot of Cash’

“It’s one of the few players in the world, besides the Saudis, who is sitting on a lot of cash and can help save the international financial system,” says Victor Shih, author of “Factions and Finance in China.”

Some fear America’s reliance on China’s money means the White House will bite its tongue when the country acts against U.S. interests or values.

“If there were not a global recession and crisis, I would expect the Obama administration to take a stronger stand on Tibet and human rights,” says Shih, a professor at Northwestern University near Chicago.

The upside of interdependence is that the two nations should be less likely now to take punitive measures against each other, says Nicholas Lardy, an economist who specializes in China at the Peterson Institute for International Economics in Washington.

No Incentive

There’s no incentive for China to stop buying U.S. securities; it needs a safe investment for dollar reserves, and its growth depends on the health of the U.S. economy. Congress also may hesitate before demanding trade barriers against a country that’s the main source of cheap goods for budget- conscious consumers.

The Communist Party’s legitimacy rests on its ability to deliver rising standards of living, without which the government’s grip on power becomes tenuous, China watchers say. So the country’s leaders have reason to worry about an economic slowdown that is pushing growth below the estimated 8 percent a year economists say is needed to create enough jobs for its citizens. Authorities are also anxious about rising discontent and daily protests over corruption, unemployment, housing and tainted food.

Obama should have a contingency plan for “what we would do if there’s a major collapse of the political order,” says Roderick MacFarquhar, a China scholar at Harvard University in Cambridge, Massachusetts.

China-Savvy Advisers

The president-elect will be able to turn for help to the China-savvy individuals he has brought into his circle. Timothy Geithner, 47, Obama’s choice for Treasury secretary, studied Chinese and has lived in China. His transition team includes Jeffrey Bader, a China specialist with a 27-year career in government that spans trade and national security.

Among the possible candidates for ambassador are John L. Thornton, a former chairman of Goldman Sachs Asia who has been a professor in Beijing; Richard Holbrooke, 67, who dealt with China as Clinton’s United Nations ambassador; and Shirk, 63, a visiting fellow at the Asia Society in New York.

Lieberthal expects Obama’s administration will engage Beijing in what he describes as “critical transnational issues of the 21st century.”

Interdependence will work to both countries’ advantage, Shirk says, “if it motivates us to do our best to cooperate rather than taking potshots.”
 
 

Offline Heather

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #1 on: December 09, 2008, 06:58:37 AM »
What kills me is that Chins's wealth was practically handed to them by the United States.  Almost EVERYTHING we use today was "Made in China".  If we would just get those factories back in the U.S. we would have plenty of jobs to go around and the wealth we are handing over to China would be here at home.  I know I know the businesses wouldn't make as much money because we have a minimum wage law and a law against child labor, but businesses that can't sacrifice a few bucks for the good of our nation and humanity as a whole doesn't deserve our business anyway.

Heather
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Any society that would give up a little liberty to gain a little security will deserve neither and loose both...Ben Franklin

Offline burntmuch

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #2 on: December 09, 2008, 07:21:41 AM »
+1 Heather, Good Luck buying Made in USA, Its almost impossible. We have to try though or our kids will be living under Chinese law. We,re selling our a$$es to the Chinese. I havent shpped at Walmart in a couple years. I just hope its not too late.
I dont care what gun Im using as long as Im hunting

Offline gypsyman

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #3 on: December 09, 2008, 08:56:44 AM »
The barn door was left open almost 20 years ago with Bush1. The horses have all but jumped the coral. And now, Obama is trying to keep the lamp from tipping over in the straw pile, with the help of the Chinese. Probably will get to hot to hang on to. All I see is a barn fire waiting to happen.  gypsyman
We keep trying peace, it usually doesn't work!!Remember(12/7/41)(9/11/01) gypsyman

Offline Troyboy

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #4 on: December 09, 2008, 12:04:12 PM »
We are enabling a sleeping enemy
.204 .22lr .22wm .25acp .223 5.56 .243 .25-06 6.5x55  .308  .300wbymag  7.5x54  7.62x25 7.62x39  338-06  9x19 .38spl  9x18 .45acp . 45-70 .500s&w 12rfl 12smb 20smb  .45lc 410smb .22hornet .280AI    Ask not what your country can do for you BUT what can YOU do for your country

Offline Heather

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #5 on: December 10, 2008, 05:16:57 AM »
We are enabling a sleeping enemy

A sleeping enemy with MASSIVE #'s of people that are  so loyal to their wonderful government.  Did anyone watch the opening ceremony of the Olympics?  They were able to get 2008 people to move in perfect unison and circles performing a Tai Chi form.  To those familiar with martial arts this would be seen as an impossible feat, yet they pulled it off, and that was one of the smaller amazing spectacles that night. I know I know they practiced and practiced endless hours for years.  It kind of makes you wonder what else they are practicing and training endlessly.  If the military is half as disciplined and dedicated as those Olympic performers, the second they don't need or want us around anymore we are screwed!

Heather
Strive for complete serenity in all aspects of life.
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A closed mind is often closed to the truth!

Any society that would give up a little liberty to gain a little security will deserve neither and loose both...Ben Franklin

Offline oldandslow

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #6 on: December 10, 2008, 05:46:21 AM »
Um, it was Slick Willy who granted China "most favored nation" trading status and everything has gone down hill for our manufacturing since with the help of our business leaders in their eternal quest to show more profit for their shareholders. I still wonder how much China paid him for that little favor.
It is a fact they made large campaign contributions to him. But what else that we don't know about?

I hate to buy anything that has "Made in China" on it but try to find an alternative. You are going to do without a lot of items if you refuse to buy Chinese because there is simply no alternative.

Why would China cooperate with Obama? Their leaders are not stupid. Almost anyone can see that if the present trend continues, they will own the US lock, stock, and barrel in a few more years. If you were in their position and could take over the greatest nation on earth financially without any risk would you change your policy?

Offline BBF

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #7 on: December 10, 2008, 08:40:35 AM »
 The Chinese are NOT sleeping anymore!
The have been awake for some time now, very much awake at that. They even gave Paulson a bit of a lesson in economics recently ::)
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Offline SHOOTALL

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #8 on: December 10, 2008, 08:50:26 AM »
GEE and Nixon's visit(S) went un noticed !
Jimmy Carter , kidding right !
If ya can see it ya can hit it !

Offline wareagleguy

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #9 on: December 10, 2008, 10:04:56 AM »
I have to laugh because no matter what bad topic we are talking about "Slick Willy" had something to do with it.  I hear he caused the great flood. ::) ::) ::)
"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety."

Offline SHOOTALL

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #10 on: December 12, 2008, 06:36:15 AM »
You sat that as a joke maybe but it shows the idea of a PARTY agenda is alive and well ?
If ya can see it ya can hit it !

Offline gypsyman

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Re: Obama to Borrow China’s Wealth, Clout in Effort to Steady World
« Reply #11 on: December 12, 2008, 07:22:38 AM »
Funny, there are quite a few people, and not just on this site, that think Bush caused everything from, 9/11 to Hurricane Katrina, the economy meltdown, and global warming. Guess it depends on what side of the fence your on. gypsyman
We keep trying peace, it usually doesn't work!!Remember(12/7/41)(9/11/01) gypsyman