China's not going to pay for this one

They're comin' to America -- all those containers in this remarkable picture, stacked up in Shanghai and waiting to move out. It's the big story of our time that gets lost in the day-to-day sniping over Roland Burris or Ann Coulter. We buy lots of cheap stuff from China on credit, and then they loan us back the money to pay for it.

If that doesn't strike you as a sound long-term underpinning for the United States or our economy, you are absolutely correct.

Now, the quickest and arguably best way out of our current economic mess is to spend even more money -- not on bric-a-brac at Wal-Mart but on real things that will make America productive down the road: Working roads and bridges and high-speed rail, research into alternative energy and revamping our health care IT. A lot of money. As I write this, the president-elect is speaking on TV, talking up this plan that could run to a $1.3 trillion pricetag in just a couple of years. The only way to do it, of course, is to borrow even more money than ever before.

But here's the thing: China's just not that into us anymore:

China has bought more than $1 trillion in American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home - a shift that could pose some challenges to the U.S. government in the near future but eventually may even produce salutary effects on the world economy.

At first glance, the declining Chinese appetite for U.S. debt - apparent in a series of hints from Chinese policy makers over the past two weeks, with official statistics due for release in the next few days - comes at an inopportune time.

Why is this happening?

But now, Beijing is seeking to pay for its own $600 billion economic stimulus - just as tax revenue falls sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and mid-size enterprises, many of which are struggling with slower exports, and Chinese bankers say they are being instructed to lend more to local governments to allow them to build new roads and other projects as part of the stimulus program.

What's kept the system going all these years is that very real 21st Century threat: Mutually assured economic destruction. China may have its finger on the monetary button, but presses it would probably cause lethal blowback to their economy as well. Unfortunately, it looks like America's much-needed push for economic stimulus may test this "Dr. Strangelove" scenario.

(Photo by Aly Song/Reuters)

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