James Fallows links to a Fareed Zakaria interview with Chinese premier Wen Jiabao:

ZAKARIA: There is another sense in which we are interdependent. China is the largest holder of U.S. Treasury bills. By some accounts, you hold almost $1 trillion of it. It makes Americans - some Americans - uneasy. Can you reassure them that China would never use this status as a weapon in some form?

WEN (voice of interpreter): As I said, we believe that the U.S. real economy is still solidly based, particularly in the high-tech industries and the basic industries.  Now, something has gone wrong in the virtual economy. But if this problem is properly addressed, then it is still possible to stabilize the economy in this country….

Of course, we are concerned about the safety and security of Chinese money here. But we believe that the United States is a credible country, and particularly at such difficult times, China has reached out to the United States.

I actually like Wen’s distinction between the real economy and the virtual economy.  I’ve noted that I believe that this is a crisis of confidence, not liquidity, and Wen’s analysis is consistent with that.  What’s missing, however, is the question of whether the real economy can operate without the virtual economy’s credit.

My second reaction is that this is the way Greenspan and Rubin talked about the bailouts of Asia, Russia, and Mexico back in the Clinton Administration.  Even though the Chinese have not acted proactively to help get us out of the mess we’re in right now, they also are doing nothing to put their dollar reserves at risk.  That in and of itself is helping to prop up the dollar more than I expected.

Welcome to the post-American century.  It may not yet be China’s but it’s not ours anymore either.

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