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Developing Economies

What's Wen Jiabao Saying?

Watch that dollar: Chinese Premier Wen Jiabao Feng Li/Getty Images hide caption

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Feng Li/Getty Images

Here's what Chinese Premier Wen Jiabao said at a Beijing press conference today:

"We have lent a huge amount of money to the United States. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China's assets."

Here's what China expert Brad Setser, an economist with the Council on Foreign Relations, tells us he heard:

"China is starting to think like a creditor, and it is starting to care about the long-run value of all the money that it has lent to the U.S."

Sester says that China more traditionally thought like an exporter, caring principally that there be a U.S. market for its goods. Now that China has so much money invested in different types of American debt — from Treasury bills to Fannie Mae bonds — China is starting to act more like a typical creditor. He continues:

"A typical creditor cares about the policies that the debtor is pursing, and wants to make sure that the debtor respects the interests of the creditors."

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We'll aim to unpack this a lot more on the podcast next week, but for now, let's just say that Setser thinks Wen is far more concerned about the overall health of the dollar than that the U.S. Treasury will default on the $700 billion to $800 billion in T-bills that Setser reckons China owns.

The timing from the Chinese premier does strike Setser as odd:

"The thing which is a little bit puzzling is that China is expressing this unease even as the dollar has gone up," he says.

More Setser coming to a Planet Money podcast near you.