HONG KONG — Some Chinese see U.S. Treasury Secretary Timothy Geithner, who was in Beijing this week, as a repentant debtor humbly visiting his bank manager. Influential Americans, however, see the visit as the start of a beautiful friendship, perhaps even a tipping point in global finance — the overture to the establishment of a Group of Two (G-2) economic giants, which will do a better job of directing the global economy than either the current Group of Seven (G7) or the ambitiously unwieldy Group of 20.
There is a compelling logic in the idea of economic partnership between the United States, the biggest economic power on Earth, and China, now the third- or maybe second-biggest economy but destined to be No. 1 in 20 or 30 years time. The fact that China — in defiance of hitherto accepted norms of international economics of a developing country — is the biggest creditor to the heavily indebted U.S. adds a certain piquancy.
Coincidentally, Brad Setser of the Washington think tank Council on Foreign Relations calculates that China's foreign assets may be worth $2.5 trillion, a cool $500 billion more than usual estimates. Besides formal reserves of $1.946 trillion, there is $252 billion in portfolio debt held mainly by state banks, plus another $186 billion "in a mysterious line item that corresponds with the banks' dollar reserve requirements and . . . other foreign assets." Also, China Investment Corporation holds up to $100 billion.