Chinas White Cellar

By Tom Plate

China has been raising its eyebrows (and sometimes mouthing blunt questions) over the safety of its mountainous portfolio in U.S. government treasury investments. But the complaints are starting to get tiresome. The bottom line is that Beijing and Washington are in this swamp together. Teamwork, not finger-pointing, is the way out.

On one level, to be sure, you can't blame the Chinese for their worrying. Past undulations of the American economy have given even U.S. officials that sinking feeling. And who knows what's in store for the future? Once upon a time, holdings in U.S. Treasuries were considered the safest places to house bucks aside from Aunt Tilley's bedroom mattress. But the U.S. economic crisis began making the mattress option look more attractive.

The Chinese have socked something like a gazillion dollars with us - mainly in the form of U.S. Treasury obligations. But, like American investors in fear of waking up and seeing their 401(k) spiraling downward in the direction of the 101(k)-cellar, the Chinese shiver from the thought of years of export gains shriveling like newly permed hair in a hot shower.

Washington is now trying to soothe Chinese nerves. Visiting Beijing, U.S. Treasury Secretary Timothy Geithner used reassuring language to appeal to China's patience and penchant for long-term thinking. He also adroitly appealed to their vanity, praising them for their own economic stimulus efforts, and pointedly downplayed noisy bilateral issues (such as China's below-market currency pegging): ``Because of the actions put in place by your government and by President Obama," he told China's President Hu Jintao in a meeting, ``we're starting to see some early signs of stabilization and recovery…."

That was the tactful tack. But Beijing needs to reciprocate. The Chinese don't like being criticized in public and neither do we. The Obama administration's calculated decision to eat a measure of diplomatic crow from time to time ― if it thinks that's what it takes ― strikes me as timely, brave (especially given macho domestic U.S. politics) and smart.

This is the way for China to go, too. For all of America's flaws and blunders, we're working to get things right; and the harder we work at that, and the less we try to blame China for our own mistake-induced troubles, the more progress we'll make. Similarly, China has to realize that the country still has a long way to go before it's some Adam Smith investment paradise. They need to remind themselves that foreign investment requires, as a minimum, massive political stability for as far as the investor's eye can see.

Consider: Does China really offer that? The recent anniversary remembrance of the near-revolution of June 4, 1989 at Tiananmen Square serves to raise just such a question. That tragedy is such a significant part of current consciousness in China that Chinese censors have been doing everything in their power to prevent websites and chat rooms from even chattering about Tiananmen Square. Worse yet, authorities physically blocked off the square in the days around the 20th anniversary.

These are not symptoms of a confident, relaxed regime. Such displays are hardly confidence builders for outside investors. If China is so fragile that people can't even discuss what happened 20 years ago, what other things are boiling inside the national pot that the censorship lid has been placed over?

By contrast, pitching American political stability is an easy sell. People who put money into U.S. treasures or properties get this from us in spades. Our last revolution, after all, was in the 18th century. And on our borders we have the relatively nice countries of Canada and Mexico. They have their problems, to be sure, but we could easily do a lot worse. Like ― we could be China and have North Korea right on our border.

When potential buyers and investors are sizing up overall property values in a neighborhood, an eyesore neighbor like that is nothing less than a one-man price deflator. North Korea recently shot off a few missiles, conducted an underground nuclear test and now looks to be readying for other fun surprises. It's not over: The other day it leaks out that a political succession in the ``Hermit Kingdom" is in the works and the leading candidate to succeed the current ``Dear Leader" (who's badly ailing) is, apparently, his youngest son. Turns out, the tyke's in his mid-20s. Smart alecks in our CIA call him the ``Cute Leader."

Cute….

So if President Hu wants to continue to talk up China as a good long-term investment, he should have his team and his propagandists spend less time worrying about the Obama Recovery Plan. Instead, they should try to clean up their neighborhood to make it less scary, and not act like it's frightened at every turn from its own historic shadows.

By contrast, America doesn't look like such a bad deal at all, its current serious troubles notwithstanding.

American journalist Tom Plate, a syndicated columnist, is writing two books on Asia. He can be reached at platecolumn@gmail.com.