America Cannot Cheat China Like It Cheated Japan

A Huanqiu newspaper survey showed that what still concerned China experts most on the opening of the China-U.S. Strategic and Economic Dialogue on July 29th in Washington was the “demand that the U.S. guarantee U.S. dollar assets in China.” This has been the worry of the Chinese since the first day of the financial crisis, and this worry is steadily increasing.

According to data from the People’s Bank of China, at the end of June, national foreign currency reserves exceeded 2.1 trillion U.S. dollars. Of this amount, 65 percent is U.S. dollar assets, including more than 800 billion U.S. dollars in U.S. bonds. Some scholars use the term “hard-earned money” to describe China’s foreign currency reserves – China’s wealth has been earned by civilians manufacturing and selling one pair of socks and one toy at a time; it is a wealth that has been painstakingly accumulated by a generation of Chinese people.

For anyone who knows a little about how America has dealt with past financial crises, it is hard not to worry about the security of China’s wealth. Historically, the U.S. dollar has depreciated after almost every financial crisis. The final result has always been that other countries suffer losses, while America successfully passes off the burden of the crisis.

According to National Bureau of Economic Research statistics, America has experienced a total of 10-odd crises of various sizes in the past 60 years. What is interesting is that the United States has not only survived every crisis unscathed, but has been strengthened by every crisis.

In 1971, because of the demands of countries vying to sell short their U.S. currency for gold, President Nixon flatly declared an end to the linkage of the U.S. dollar to gold. In the end, the United States survived the crisis by shirking its duty to other countries. In the mid-1980s, the U.S. dollar exchange rate greatly increased, hindering exports and causing a decline in manufacture. In 1985, the United States signed the “Plaza Agreement” with Japan and other countries, forcing the Japanese yen and other currencies to greatly appreciate, surviving a crisis once again, while Japan paid the price of having several years of economic stagnation.

In actuality, Chinese people have even more reason to worry. Currently, there is a strong appeal in the United States for the Obama administration to bring out the second economic stimulus plan. Stimulating the economy requires a large amount of loans, and according to economic analysts, the additional amount that would be required could reach 2 trillion U.S. dollars.

Such a large amount could come from only two sources—an increase in national debt or an increase in the circulation of currency. Many experts have warned that the U.S. government would have to take on greater and greater burdens because of this, with U.S. bonds taking on the enormous crisis. If U.S. bonds suffer a crisis, the country that would be hit the hardest is undoubtedly China.

In this moment of crisis, America must face up to the situation and take the worries and appeals of the Chinese people seriously — not just make verbal promises — but clarify the potential issues with China as soon as possible and come up with a complete set of concrete solutions.

The aim of the U.S.-China Strategic and Economic Dialogue is to broaden common ground, reduce differences, deepen mutual trust and accelerate cooperation. The key to reaching this objective is to practically guarantee that the core interests of both parties will not be harmed. It would be dangerous for one side to care only for its own interests and not consider the interests of the other, or even to harm the other’s interests.

China is not the Japan of 20 years ago. Only by putting China at ease can America maintain its international reputation — and only then can America gain China’s support on many issues. This type of support for the America of today is something the United States cannot do without. If Americans want to cheat China like they cheated Japan in the past, they will certainly lose the Chinese people’s trust, and cause U.S.-China relations to regress, resulting in both sides losing.