ROBERT SIEGEL, host:
The guest list could not have been more impressive. Some of the most powerful people in the world, leaders from the U.S. and China, got together this week in Washington to show how closely tied they are. President Obama made an appearance. Treasury Secretary Timothy Geithner, and Secretary of State Hillary Clinton and their Chinese counterparts spent hours together.
Adam Davidson of NPR's Planet Money has been following the U.S.-China relationship for years. And Adam, how important was this week's meeting?
ADAM DAVIDSON: I think this was really one of the most important diplomatic events in many, many years. It was a big deal because it showed a fundamental change of tone. This meeting between U.S. and China was much more a meeting of equals, rather than a dominant U.S. lecturing China and a subservient China, sort of angrily lecturing back but clearly being subservient. Now that we are in this financial crisis, China is the U.S.'s primary creditor, we're far more equal than we've ever been.
SIEGEL: And the Chinese delegation lectured the U.S. on inflation and on debt. It said the U.S. is risking the collapse of the dollar. And the collapse of the dollar would be very painful for the Chinese.
DAVIDSON: Yeah. China has estimates of, you know, 1.5 trillion or more in U.S. dollars, it forms the core of their economic stability. And they are very worried that the U.S. might do something that lots of countries have done in the past, which is when you owe a lot of money, create inflation. Print a lot of your currency to create inflation, and suddenly, $1.5 trillion in debt just isn't worth so much, and that would be devastating for China.
SIEGEL: So China is afraid that the U.S. will inflate its currency. What's the U.S. afraid of?
DAVIDSON: The U.S. is really not focused on China, which is another very interesting and dramatic change. Under the Bush administration, China was an obsession. I mean, you could say that the Treasury secretary's job under the Bush administration, at least before the financial crisis, was primarily to convince China to stop manipulating their currency and keeping it lower than it should be against the dollar.
Right now, President Obama, Treasury Secretary Geithner, they have thousands of crucial economic issues on their list that are far more important than the relationship with China. So we have this situation that's sort of reversed of what it was a couple years ago, where China is obsessed with getting the U.S. to change our economic policies, and the U.S. just is not really focusing on China.
SIEGEL: Now, we've been focusing on the points of contention in the relationship. Were there areas of agreement?
DAVIDSON: Yeah. I think what's fascinating about the U.S.-China relationship right now is they do agree on the short term, like the coming months. They both believe that stimulus spending is very important and that, you know, getting this recession over is very important.
They both agree on the very long term, you know, 10 years, 20 years, 40 years down the line. They want the U.S. not to be so dependent on Chinese debt; they want China not so dependent on U.S. consumers. They just can't agree on the middle ground, how we get from here to that future world where we're both more self-sustaining. And there's a lot of tough decisions that have huge impacts on manufacturing sectors and lots of other parts of the economy. And as far as anyone can tell, basically, the U.S. and China are absolutely thrilled to just punt those tough decisions down the road a bit.
So, what we saw a lot of this week was a little bit of grandstanding, a little bit of, hey, U.S., you've got to act better, but a whole lot of handshaking and smiling and just not facing the tough, contentious issues. Those will have to wait until the recession is over and the crisis is over.
SIEGEL: Okay, thank you, Adam.
DAVIDSON: Thank you, Robert.
SIEGEL: That's Adam Davidson of NPR's Planet Money. You can find the Planet Money blog and podcast at the new npr.org/money.
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