Author: Fareed Zakaria
What struck me this past week was China’s reaction to our credit downgrade. Its state-run media thundered that America needed to “cure its addiction” to debt. A Hong Kong newspaper widely read on the mainland ran a front page with a banner saying “The American Dream is Over.” It went on to report that Washington owes every single Chinese citizen 5,700 Yuan – about 900 U.S. dollars.
Another editorial said Washington’s solution to its debt time bomb was to make the fuse one inch longer. That kind of commentary has hit a nerve with the Chinese people. After a drop in Shanghai’s stock market, bloggers took to local social media sites. One wrote: “The U.S. suffered a downgrade, why did we become the biggest victim?” Another said: “It was a huge mistake to buy U.S. bonds with Chinese taxpayer money. We must hold those who are involved responsible.” Here in the U.S. you hear many people worry that the Chinese government might stop buying American T-Bills. I think these fears are vastly overblown. The economic situation between China and the U.S. is the financial version of mutually assured destruction – that cold war doctrine of nuclear deterrence. If you destroy me, I will destroy you.