Sunday, March 15, 2009

Obama: "Absolute confidence in soundness of U.S. investments"

The Chinese are nervous:
[China's Premier Wen Jiabao] told reporters in Beijing on Friday that he was concerned about China's huge stake in the US economy as it endures the worst crisis in generations.

"We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets," Wen said.

"To be honest, I am a little bit worried and I would like to ... call on the United States to honor its word and remain a credible nation and ensure the safety of Chinese assets."
Barack Obama said:
... China could have "absolute confidence" in the American economy....
The world markets shuttered at those comments:
Wen's comments caused a stir in global markets, and were the latest disturbance to the critical US-Chinese relationship early in Obama's administration.
The Chinese reportedly are concerned about the enormous amount of borrowed money, including Obama's nearly 800-billion-dollar stimulus, being used to boost US growth.

Concerns are flaring in China that the stimulus plan could hurt dollar-denominated assets, with some observers urging China to cut US Treasury holdings, the official Xinhua news agency said last month.

Domestic critics have charged that, as a developing country, China should be investing at home instead of subsidizing the world's richest country, or else diversifying into other foreign assets.
H/T to DK

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