It wasn’t the size of the U.S. budget deficits — or how much Treasury debt
China now buys — that made Tim Geithner blush in Beijing this morning.
During his maiden visit to China as U.S. Treasury Secretary, Geithner visited Peking University to give a speech and answer a series of probing questions
from students. The school — “Beida,” as the Chinese call it — is
probably the country’s premier university, and in 1981, after his sophomore
year at Dartmouth, Geithner did an eight-week program in Mandarin there. After
his speech today, one of his old teachers produced a photo of Geithner from
that summer: it showed the future Treasury Secretary looking anything but
buttoned down. Dressed in a T shirt and sporting a head of unruly, curly
hair, he was photographed in front of Beijing’s main railway
station before he departed on a trip to Beidaihe, the seaside resort to which
Beijing residents flock to beat the oppressive summer heat in China’s capital.
Surf’s up, dude. The audience of 150 students laughed as Geithner, grinning
sheepishly, accepted the photo.
As light as this moment was, it served to underscore a point Geithner will
make many times on this trip and any other time he comes to Asia in his new
job: this is the region of the world, more than any other, that helped shape
Geithner’s worldview. His father Peter was a senior executive running Asia
programs for the Ford Foundation, and as a boy Geithner lived in India
and Thailand. In college he studied both Mandarin and Japanese, and as he told
the students this morning, his two summers in Beijing helped convince him that “I wanted to work for my
government, and help to shape its policy toward this part of the world.”
By the early 1990s, Geithner was deputy Treasury attaché in the Tokyo
embassy. Barely 30, he played an outsize role in key trade negotiations for
someone so young. By the late ’90s, he was in Washington, helping both
Lawrence Summers, now President Obama’s chief economic adviser, and then
Treasury Secretary Robert Rubin deal with the Asian financial crisis that
flattened economies in the region.
The depth of his Asia experience and the sense that he understands the
concerns of policymakers on this side of the Pacific are now of paramount
importance. Chinese leaders have expressed deep concerns about the Obama
Administration’s efforts to shore up companies and the economy with
massive government spending programs, and it is up to Geithner to provide
assurances that the value of China’s vast holdings of U.S. bonds will not
be debased as a result of America’s rising deficits. Indeed, a question
Geithner heard from a bright young Peking University student is the same one he’ll
hear on Tuesday, when he is scheduled to meet with Chinese President Hu Jintao and
Prime Minister Wen Jiabao: How safe are Chinese investments in U.S. Treasury
debt
“Very safe,” Geithner quickly reassured the student
questioner, as the audience laughed. Despite the surge in spending to deal
with the financial crisis, the Obama Administration is committed to getting
the fiscal deficit back down to a level that “is sustainable over the medium
term,” Geithner said.
The students didn’t press him this morning on how, exactly, the U.S. will
do that, or what “the medium term” means. That’s what the Chinese leadership
wants to know, though, and they no doubt started asking later in the day, when Geithner met with Vice Premier Wang Qishan and Zhou Xiaochuan, the
governor of the China’s central bank.
Establishing yourself as an old friend, as Geithner did this morning, is
always good for street cred in China. In these treacherous economic times,
though, having persuasive, detailed answers will be even better.
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