The Biden Administration Is Preparing to Bail China Out | Opinion

[william]

On August 19, the U.S. Treasury Department announced an agreement with China to promote cooperation on financial matters. Treasury reported that the Fifth Meeting of the Financial Working Group with the People's Bank of China, China's central bank, had "concluded with the Treasury and the PBOC exchanging letters in support of coordination during times of financial stress to strengthen appropriate information sharing and reduce overall uncertainty between Treasury and the PBOC regarding crisis management and recovery and resolution frameworks."

Beijing overstimulated its economy to get past the 2008 global financial crisis. Chinese leaders created growth then, but they made the country overly dependent on government spending, building, among other things, too many apartment blocks, skyscrapers, and high-speed rail lines.

And they incurred too much debt. China's total-country-debt-to-GDP ratio, after taking into account the so-called "hidden debt" and adjusting for inflated GDP reports, could be, according to my estimate, 350 percent.

Why is Xi continuing with an unsustainable plan? By bolstering manufacturing, he is pleasing core Communist Party constituencies, helping struggling state banks and building China's capacity to wage war. Moreover, the Party now believes, as Liu of the Council on Foreign Relations notes, that "consumption is an individualistic distraction that threatens to divert resources away from China's core economic strength: its industrial base."

"Chance of structural reform?" Anne Stevenson-Yang of J Capital Research USA asks. "None."

No real reform means China has a near-zero chance of avoiding a financial crisis. As President Joe Biden said in August of last year at a private event for Democratic Party donors in Salt Lake City, China is a "ticking time-bomb."

Roger Robinson, former chairman of the U.S.-China Economic and Security Review Commission, focuses on the symbolism of the August 19 agreement. "The signals sent by the bilateral Financial Working Group scream Treasury-led bailout preparations, the exact opposite of, for example, properly closing off Chinese access to the U.S. capital markets and private equity flows for American-sanctioned Chinese companies and other corporate bad actors," he told me.

At a time when the world is looking to the U.S. for leadership on China, Washington should not, as Robinson argues, give any indication that the U.S. supports the maintenance of the dangerous Chinese regime as it moves in especially troubling directions.

Whatever Treasury is trying to do with the August 19 agreement, America needs to quickly reassess relations with China. "The Chinese Communist Party's primary vulnerabilities lie in its current economic weaknesses, including the possibility of significant financial instability," Jonathan Ward, author of The Decisive Decade: American Grand Strategy for Triumph Over China, wrote to me this month. "While some may see the Financial Working Group as a confidence-building measure that can create stability in the U.S.-China relationship, Washington should not provide a lifeline to this adversary."

Three times in the past—in 1972, 1989, and 1999—American presidents saved Chinese communism. Whatever the wisdom of the policies then, at this moment, as Maria Bartiromo puts it, the U.S. should not be "Underwriting the Enemy."

Gordon Chang is pretty right leaning, and I happen to agree with his insight most of the time

MSN