Getting pushed around by China?

China is flexing its economic muscle, said the Hong Kong South China Morning Post in an editorial. Chinese Premier Wen Jiabao last week said he was “a little bit worried” about the safety of the more than $1 trillion China has invested in U.S. Treasury bonds. The “unexpected” comment was widely seen as a signal that Beijing plans to use its newfound influence over Washington to force concessions on trade. Wen also said that China would not increase its contributions to the rapidly depleting International Monetary Fund unless the IMF gave China a greater decision-making role. Taken together, China’s new positions “amount to a bid to increase its bargaining power” in global financial matters.

There may be less to China’s muscle-flexing than it appears, said Marcus Gee in Canada’s Globe and Mail. In reality, China can’t really use its economic leverage against the U.S. If Beijing were to “turn around and start selling dollars”—a threat implicit in Wen’s comment—the value of the dollar would sink against the Chinese yuan. That would have the effect of making Chinese exports much more expensive, and China would suffer. And even if China wanted to diversify and invest more in countries other than the U.S., that’s not much of an option. Investments everywhere are losing value, and U.S. government bonds are still the safest place to invest. “So much for the idea that China has the whip hand over the United States.”

Instead, we are seeing the “financial version of the doctrine of mutually assured destruction,” said Peter Hartcher in Australia’s Sydney Morning Herald. Just as the U.S. and the Soviet Union could not launch their nuclear arsenals during the Cold War for fear of massive retaliation, so now the U.S. and China can’t act against each other economically. Of course, the MAD doctrine was extremely risky and unstable, and the world “nearly came to an end” at least twice during the Cold War. As President Obama’s economic advisor Lawrence Summers says, “It surely cannot be prudent for us as a country to rely on a kind of balance of financial terror.” Yet that is what the entire global economy depends on.

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Don’t worry, said Zheng Weiyun in Singapore’s Lianhe Zaobao. China will certainly continue buying up U.S. bonds, because “there is much more benefit than loss for China” in doing so. As the country continues to manufacture goods for the U.S market, the Chinese unemployment rate stays low and its technological sector advances. Since 2000, China has rapidly urbanized, and its per capita wealth has grown remarkably. When China buys Treasury bonds, everybody wins. “The U.S. and China are actually economic allies”— just “not in name.”