More on American Dollar and Empire

China’s statement today that the US needs to practice financial prudence and control its trade deficit comes in response to US complaints over Chinese currency controls, which the US complains hinders US exports to that country.

We’ve noted the fascinating financial regime that helps to explain a lot about contemporary geopolitics, and that claims to US economic imperialism are a bit overblown. The financial regime consists of a network of transactions: the Chinese buy US Treasury bonds as a way of sustaining the US dollar while the US keeps its doors open to Chinese goods, thereby sustaining China’s twin project of industrialization and maintaining low production costs (as the engine of industrialization).

China faces yet another balancing act:

“Although China has a surplus in trade with the United States, China has a deficit in its trade with Asian countries,” Qin said.

China’s potential to be an economic “powerhouse” is threatened by the possiblity of being flooded with goods from other Asian nations, which are less economically developed and able to produce goods at cheaper rates than China can.

UPDATE: Meanwhile, US worries about the Chinese navy.