Understanding China, One Blog at a Time

An American in China

China and US Relationship

Posted by w_thames_the_d on June 30, 2011

This is an excerpt detailing the relationship between China and the USA.

The Beijing Consensus-new (Stefan Halper)

In fact, a measure of stability is found in what has become a marriage of liabilities; China’s “threat” to the United States is mitigated by the U.S. “threat” to China. The Chinese have as much interest in keeping the U.S. economy and the U.S. dollar stable as do Americans themselves. The Chinese government has purchased American debt for the simple reason that such purchases sustain the macroeconomic engine the Chinese people rely on. Chinese investment in American assets such as bonds and mortgage-backed securities has helped to keep American interest rates low, made credit easier to obtain, and generated a pool of capital for Americans to continue buying consumer products—that is, Chinese consumer goods. Low interest rates have also been crucial in enabling American businesses to expand. Lower mortgage rates help more people to buy houses and push up the value of real estate. With higher house prices, consumers have borrowed against the increase in equity in their homes and spent the difference. 27 The huge supply of foreign money has enabled the U.S. government to fund large deficits that have stimulated the U.S. economy, allowing for lower taxes and more jobs created by government spending.

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