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September 23, 2017

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China will be happy with Geithner

Many in Asia wonder if it's a conflict of interest for the firm, where Paulson served as chief executive officer, to benefit from U.S. bailouts.

Geithner, meanwhile, has lived in China, India, Japan and Thailand and studied Mandarin and Japanese.

With Geithner's resume, he could just as easily get a top job at the State Department. That's a significant asset when economic relations with China — and the rest of Asia — will require diplomacy as well as deft policy making.

The Strategic Economic Dialogue was a recognition that the U.S. needs China's help as much as China needs the U.S.'. Kudos to Paulson for getting that.

The framework still hasn't achieved anything approaching its promise. One reason Geithner can move things forward is his time with Bill Clinton's administration. Clinton empowered the Treasury to take on tasks previously carried out by diplomats. Geithner will bring that view into Obama's universe.

The U.S. simply isn't in a position to demand this or that from China.

Treasury officials no longer have the leverage they once did as Wall Street plunges and the U.S. needs Asia's money to stabilize its financial system.

This dialogue began when China was growing 10 percent and the Dow Jones Industrial Average was soaring.

Geithner will take the reins as China struggles to bolster growth and the U.S. is desperate to keep the biggest holder of Treasuries from dumping dollars.

The China-U.S. relationship was aptly summed up last week by an e-mailed note from Eswar Prasad of the Brookings Institution in Washington. Its title: " Lame Duck Meets Hobbled Panda."

The U.S. even came in for a gentle rebuke last week when Paulson attended his fifth and final China powwow.

In Beijing, Vice Premier Wang Qishan described the financial crisis as "the most pressing task that we are facing" and urged the U.S. to protect Chinese assets in that country.

China's economy is slowing fast amid recessions in the U.S., Europe and Japan. While a stronger yuan might help China boost domestic demand, it could devastate the all-important manufacturing industries. China won't go for it.

Geithner won't waste the amount of time President George W. Bush's team did figuring that out. Geithner also will be working with Lawrence Summers, tapped by Obama to be White House economic director. Summers last year urged lawmakers to go easy on China's currency policies.

Obsessing over the yuan has gotten the U.S. nowhere. Perhaps some new thinking at the Treasury will.

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