China Worried After Lending To US

AS China's slumping economy feels the impact of the global recession, Chinese leaders are showing their irritation with the U.S. That's obvious in the ongoing war of words following a near-clash between U.S. and Chinese naval vessels in the South China Sea on March 8.
    China's Premier Wen Jiabao ramped up the rhetoric some more. Wrapping up the annual session of China's Parliament, Wen took a swipe at the U.S. Over the past few years, China has built up the world's largest foreign reserves, totaling $1.95 trillion, with some two-thirds of that held in U.S. assets, mainly Treasuries. "We have lent a huge amount of money to the United States," Wen said at a press conference in Beijing's Great Hall of the People. "I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises, and to guarantee the safety of China's assets."
    Another area of sensitivity is the value of China's currency, the Yuan. With exports plunging in China, and some 20 million in export factories out of their jobs, Beijing has slowed the appreciation of its currency. Chinese officials already reacted angrily to criticism that it was "manipulating" its currency made by U.S. Treasury Secretary Timothy Geithner during his late January Senate confirmation hearings. Signaling that Beijing has no intention of budging on the issue, Wen spoke out during the morning press conference. "I don't think the (Yuan) is depreciating. Since we reformed the exchange rate in July 2005, the Yuan has appreciated 21% against the U.S. dollar," the Premier said.
    China's leaders are also speaking out against what they see as "surging" protectionism, as Wen described it during the March 5 opening of the National People's Congress. "If a country only buys products that it produces itself, and forbids the import of other countries' products without reason, this suggests a move to trade protectionism," said Commerce Minister Chen Deming.
    Along with the tough talk, Beijing is expressing confidence about China's ability to weather the global recession. While Beijing did not announce plans to expand the size of its $586 billion stimulus as some had anticipated, China has the ability to spend more, since it has targeted a relatively small budget deficit of 3% of GDP for this year.