Can America foot the bill for its Chinese takeaway?
Last week George Bush, leader of the most powerful country on earth, met Hu Jintao, his banker. Mr Hu presides over a country which has $1 trillion of foreign exchange reserves, the proceeds of a vast trade imbalance with the US. Last year China sold around $240bn worth of cheap goods to America. Next year it will be more like $300bn. By hoarding dollars, China keeps its own currency artificially low, which in turn fuels the export boom. Or, put another way, Chinese manufacturers are having a great time feeding the insatiable appetite of US shoppers, who can’t get enough of those low Chinese prices. The Americans, meanwhile, have money in their pockets because they can borrow at low interest rates, which are in turn a product of China buying bucks on international markets. This is an unspoken bargain and a perilous one. The US trade deficit cannot keep growing exponentially. American industry desperately wants to sell something back to the Chinese, but their bloated currency, among oth
