China recently surpassed Japan as the US government's largest creditor. Any decision by Beijing to move its money would deal a dizzying new blow to an already tottering American economy. Yet relations between China and the new Obama administration are off to a rocky start.
For now, Beijing continues to loan Washington money by buying Treasuries and other US government securities, helping to finance the ever-growing US budget deficit. But there are signs its leaders may be considering trimming these holdings as that country experiences its own economic slowdown. Strains between the two economic powerhouses seem to be growing with the change in administrations.
The latest irritants are a "buy American" provision attached to White House-backed stimulus legislation moving through Congress and criticism of China's currency policies by Vice President Joe Biden and Treasury Secretary Timothy Geithner.
Geithner accused Beijing of "manipulating" its currency during his Senate confirmation process.
Biden, interviewed Thursday by CNBC, said that the Obama administration would "say to China -- which occasionally the last administration was reluctant to do --'You're a major player on the world scene economically, and you've got to play by the rules that everybody else plays by." Their comments followed a move by Chinese censors to silence part of a live broadcast of Obama's inaugural address when he spoke of the US struggle against communism.
And at an economic forum in Switzerland on Wednesday, Chinese Premier Wen Jiabao blamed China's economic woes on US-led Western financial institutions, suggesting "a lack of self-discipline" and "blind pursuit of profit."