China’s economy overtook Germany’s to become the third-largest in 2007. Japan may be next to be leapfrogged, if China can sort out its relationship with the U.S.
The U.S. and China should do the global economy a favor and formalize the G-2 process. Summit meetings, communiques, press conferences, the works. Only, this framework must be about more than photo ops, vague language and polite discussion. It must be about the world’s two most important economies working together to avoid disaster.
When it comes to global stability, few things matter more than China’s massive holdings of U.S. Treasuries. That may be seen in Paulson’s need to liaise with Chinese officials before the U.S.’s stimulus plans were announced. If China doesn’t buy much of the debt the U.S. issues, who will? And if China balks, the rest of Asia may, too.
That’s why the G-2 needs to be a genuinely equal partnership. It can’t be a developed nation holding more chips than a poorer one. That was fine two years ago, before a meltdown in the U.S. imperiled global growth. Now that the U.S. is arguably looking a bit like a developing economy itself, the high horse has to go.
bloomberg
