China and the Credit Crisis: The Emergence of a New World Order

CHAPTER 6

Rowing the Same Boat: Sino–American Relations

On June 1, 2009, Treasury Secretary Tim Geithner found himself in Beijing speaking to a mostly Chinese audience at Peking University. Although the main purpose of his meetings was the same as his predecessor Henry Paulson, namely the development of economic and financial cooperation between China and America, his tone was very different:

China, despite your own manifest challenges as a developing country, you are in an enviably strong position … Business and households in the United States, as in many countries, are still experiencing the most challenging economic and financial pressures in decades … The extent of the damage to financial systems entails significant risk that the supply of credit will be constrained for some time. The constraints on banks in many major economies will make it hard for them to compensate fully for the damage done to the basic machinery of the securitization markets, including the loss of confidence in credit ratings. After a long period where financial institutions took on too much risk, we still face the possibility that banks and investors may take too little risk, even as the underlying economic conditions start to improve.¹

Geithner’s speech left no doubt that cooperation between America and China was at the center of his strategy for economic recovery:

China and the United States individually, and together, are so important in the global economy and financial system that what we do has a ...