Tuesday, December 9, 2008

'Be nice to the countries that lend you money'

China's leading investment official, Gao Xiqing, suggests we Americans take such advice to heart. Read an interview between Mr. Xiqing and one of America's leading journalists, James Fallows, here.

An excerpt:

Mr. Fallows: With so much of China’s money at stake, did U.S. officials consult the Chinese about the rescue plan?

Mr. Xiqing: Not directly. We were talking to people there, and they were hoping that we would be supportive by not pulling out our money. We know that by pulling out money, we’re not serving anyone’s good. Including ourselves. [This is the famous modern “balance of financial terror.” If Chinese officials started pulling assets out of the U.S. and touched off a run on the dollar, their vast remaining dollar holdings would plummet in value.] So we’re trying to help, at least by not aggravating the problem.

But I think at the end of the day, the American government needs to talk with people and say: “Why don’t we get together and think about this? If China has $2 trillion, Japan has almost $2 trillion, and Russia has some, and all the others, then—let’s throw away the ideological differences and think about what’s good for everyone.” We can get all the relevant people together and think up what people are calling a second Bretton Woods system, like the first Bretton Woods convention did.

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