Geithner's assurances fall on deaf ears

• Source: The Global Times
• [01:56 June 02 2009]
• Comments

By Kang Juan

US Treasury Secretary Timothy Geithner (right) holds up a photo of himself taken years ago
during his studies at Beijing University. His former teacher, Bo Min (left), gave him the picture following his speech at the university yesterday. Geithner kicked off his two-day visit to Beijing by calling China and the US indispensable partners in solving the global financial crisis and other urgent economic issues facing the world (see story on page 2 and 8). Photo: AFP

US Treasury Secretary Timothy Geithner went back to school yesterday, visiting Peking University as part of his tour of China and assuring the Chinese that their holding of US debt is not at risk.

His assurances, however, fell on some deaf ears as he failed to offer definite proof, and various Chinese scholars interpreted the words as merely a “good attitude,” given that they didn’t offer a concrete solution to the current trade and economic disputes.

“Chinese assets are very safe,” Geithner said in a speech yesterday, renewing a pledge that the Obama administration will control the country’s rising national deficit. China is the largest creditor to the US, which raises fears that the bonds purchased by China may lose value if economic struggles in the US continue.

Geithner’s assurance even drew laughter from the primarily student audience at Peking University, where he studied Chinese in the 1980s, reflecting skepticism in China about the government’s huge holding of US government debt, which has this year handed investors their worst loss since 1977 on forecasts of a ballooning deficit.

“We are going to have to bring our fiscal deficit down to a level that is sustainable over the medium term,” Geithner said. “This will mean bringing the imbalance between our fiscal resources and our expenditures down to the point – roughly 3 percent of GDP – where the overall level of public debt to GDP is definitely on a downward path.”

The US deficit for the current fiscal year, ending September 30, is projected to reach a record $1.75 trillion from last year’s $455 billion shortfall, according to the Congressional Budget Office. China held about $768 billion worth of Treasuries as of March.

In his prepared remarks yesterday, Geithner also reaffirmed his faith in a strong US currency, and he offered strong backing for a bigger Chinese role in international policymaking. “We will make a joint effort in a concerted way,” Geithner said, citing a Chinese idiom and repeating it in Mandarin to conclude his speech.

“Not a word of Geithner’s speech made at Peking University sounded unpleasant to China. The content was well-designed to cater to the taste of a Chinese audience,” Yuan Peng, director of the Institute of American Studies at the China Institutes of Contemporary International Relations (CICIR), told the Global Times.

After the speech in his old school, Geithner, 47, met Vice Premier Wang Qishan yesterday, and will meet President Hu Jintao and Premier Wen Jiabao, who in March called for the US to “guarantee the safety of China’s assets.” He is also scheduled to visit the Ford Foundation, a place he has a personal interest in, given that his father helped establish the Beijing office of the organization.