3.13.2009

China warns Washington

According to the New York Times:

The Chinese prime minister, Wen Jiabao, expressed unusually blunt concern on Friday about the safety of China's $1 trillion investment in American government debt, the world's largest such holding, and urged the Obama administration to provide assurances that the securities would maintain their value in the face of a global financial crisis.

How might President Obama credibly assert that China's bonds will maintain their value throughout the current crisis? He cannot, of course. By definition a riskless investment does not exist. Perhaps the prime minister is playing an assurance game by seeking to promote trust and cooperation between two countries that have much to lose if economic crisis takes a turn for the worse.

No comments: