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Showing China Some Love

I get misty-eyed when I witness true love, whether it is between a grandparent and a new grandchild, a boy and his dog, or a banker and his biggest borrower.

So I was touched by the warm greeting China’s leaders extended to President Obama last week, and by the almost Confucian respect that our young commander-in-chief showed his elders on the world stage. China's rise is an achievement "unparalleled in human history," Obama said. Standing before the Great Wall, he told a Chinese journalist that he had “great admiration for Chinese civilization.” In return, the People's Liberation Army played "I Just Called To Say I Love You" for him.

While China’s rapid economic development is certainly impressive, we should note that the man who insists that everyone in America must have health coverage made these laudatory comments in a country with almost no social safety net at all—nor much freedom on the part of its citizens to say or do anything about it.

Obama's Chinese-style "town hall" meeting was held in front of a hand-picked group of students from the Communist Youth League. Audience members asked questions meant to be safely non-controversial such as, “What's the main reason that you were honored with the Nobel Prize for Peace?”

Obama did not mention how honored he was to receive the same award that the Dalai Lama accepted in 1989, nor how ironic it is that he should be linked through the award to such a significant year in China’s history, given America’s strong views on the Tiananmen Square repression. The Nobel Prize can, indeed, be controversial in China, but like the aspiring Communist leaders in his audience, the last thing Obama seemed to want was controversy.

In one of the more interesting portions of the meeting—which was not picked up by Chinese television outside of Shanghai and which was not available for viewing by China's hundreds of millions of Internet users—the American president said, “I'm a big supporter of noncensorship.”

The next day, Obama held a joint press conference with Chinese President Hu Jintao that involved no questions from the press. Instead, each leader delivered a prepared statement.

White House officials claim that, behind closed doors, the president brought up the tough issues and “pulled no punches,” as Michael Froman, one of his economic advisers, put it. However, the president made no visible progress toward resolving big political or economic frictions, ranging from sanctions against nuclear programs in Iran and North Korea to protectionist American tariffs and China's artificially depressed currency.

According to Froman, the fact that China holds more than $800 billion in U.S. debt “never came up in conversation.” It may be true that Hu and Obama never mentioned the money, but they were definitely thinking about it

These two world giants need each other. Obama's hugely expensive domestic agenda is absolutely dead without China's continued infusion of money, and China's hoard of Treasury obligations could crash in value if it turns off the tap. That is one of two reasons the Chinese keep raising Washington’s credit limit. The other is that buying American securities, mainly Treasuries, is how the Chinese keep their own currency from rising in value. And, although this reduces the buying power of the Chinese consumer, it makes it easy for China to keep its factories humming to turn out goods for export.

At other stops on the president’s trip, China's Asian neighbors gave Obama an earful about how the falling U.S. dollar and the lock-step depreciation of China's currency have forced them to devalue their own money. Everyone in Asia is paying more and earning less, thanks to the imbalanced Chinese and American policies. “There should be world pressure on China to respond more to global market forces and play the game right,” said Anand Mahindra, managing director of Mahindra & Mahindra Ltd., India’s largest sport-utility vehicle maker.

The issue of China’s currency was a major topic of conversation at a recent Group of 20 meeting, where Indonesia’s finance minister, Sri Mulyani Indrawat, said, “We need to discuss this in a manner that China recognizes that change needs to be done.”

But, like two drunken sailors, China and America toast each other and stagger off into the darkness, holding one another up. They may not like one another all that much, but neither can get along without the other. That's love, right? I can almost hear Helen Reddy singing "You And Me Against The World."

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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