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Mired in a brutal recession, the United States needs Beijing to boost its purchases of U.S. goods, let China's currency rise and take other steps to narrow an enormous trade gap. And it needs China's help to combat any military threat from North Korea.
The problem is Washington's leverage has waned just as China's power over the U.S. has grown.
China is now America's biggest creditor. As of March, it held $768 billion of Treasury securities — about 10 percent of publicly traded debt.
The Obama administration insists it isn't worried that the mound of debt it's creating will jeopardize America's sterling AAA bond rating. But Treasury officials said Geithner still intends to reassure the Chinese.
Geithner plans to stress that the administration sees the $1 trillion-plus deficits for this and next year as temporary. The deficits are necessary to fund a stimulus package to help lift America out of recession and invigorate a wobbly U.S. banking system, officials say. Once those needs are met, the administration says it will make deficit reduction a top priority.
"The Obama administration believes strongly in fiscal discipline," said a senior Treasury official. If the Chinese raise the deficit issue, Geithner "will listen to their concerns," said the official, who spoke to reporters under rules that didn't allow him to be identified.
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s. His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.