Recent events confirm that we're living in a new world of disorder. North Korea tested a missile that could reach the U.S., and is threatening to resume its nuclear-weapons program; the Taliban is using drug money to destabilize Afghanistan and turn that country back into a terrorist safe haven; the financial crisis has sparked a global recession; and unchecked greenhouse gas emissions are transforming the global climate.
These disparate challenges share one thing in common: They cannot be addressed successfully without cooperation between the U.S. and China.
The most immediate opportunity for cooperation is in confronting the international financial crisis. China currently holds $2 trillion worth of largely U.S. dollar-denominated foreign exchange reserves, and it is by far the world's largest holder of U.S. government debt. As the Obama administration increases that debt to finance its economic stimulus plan, China will almost certainly be called upon to purchase the lion's share of new U.S. debt instruments. China also has an interest in working with the U.S. to ensure those efforts succeed, because it depends on economic growth in the U.S. (still its largest single trading partner) to ensure stability at home.
There is a compelling need to create a new dialogue on finance and economics. This conversation began with President Barack Obama and Chinese President Hu Jintao's discussions at the G-20 summit this month in London. Meetings between U.S. and Chinese leaders have been dubbed the "G-2" by some to reflect the crucial role of economic negotiations between our two countries. This first meeting between the two men, and the agreement reached by world leaders at the close of the summit, mark a positive beginning to the effort to harmonize our financial management and banking regulatory practices, and explore ways to expand bilateral trade opportunities in areas such as energy and environmental technologies.
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