THERE ARE TWO WAYS to interpret the fact that China is America's largest creditor at a moment of stupendous American borrowing. The first is as an economist. And we'll get to that. But the second is as a thriller writer--or paranoid economic and political nationalist--and it is much, much juicier.
The thriller scenario begins in the blood-red corridors of the Zhongnanhai leadership compound in Beijing, next door to the Forbidden City. Here China's political elite has been plotting their usurpation of American power for decades. Bent over their Lenovo Thinkpads, the brilliant sons of Communism have engineered nothing less than a global revolution.
Dissolute, wasteful, crass America has been rotting, borrowing and spending, licking lead toys and watching "The Girls Next Door." Meanwhile, diligent, thrifty, clever China has been preparing to take its place, squirreling away money and buying American debt.
Poor America thinks only in four-year election cycles, cackle the Beijing bureaucrats, whereas China thinks in hundred- and thousand-year spans, in vast historical revolutions that must inevitably turn in their favor.
Does any issue sum it up better than patent infringement? "We can't do business with a country which pirates 'The Dark Knight' and Microsoft Office," screams America. "Fine," say the Chinese, "But did we ever see a penny from our invention of paper?"
And so, in the spring of 2009, the time came for China to spring its trap.
As with the assassination of Archduke Ferdinand in 1914, no one believed so trivial an incident as the hassling of a U.S. naval ship in the waters of the South China Sea could precipitate the events that followed.
Sunday, March 8, 75 miles south of Hainan Island. The USNS Impeccable was cruising in international waters, dragging behind it a Surveillance Towed Array Sensor System (SURTASS), a listening device used to pick up underwater acoustical data, notably submarine movements.
Suddenly, five Chinese boats appeared and surrounded it, one coming within 25 feet. A Chinese sailor produced a grappling hook and tried to snag the Impeccable's SURTASS. The Impeccable's crew sprayed him and his ship with a fire hose. The Chinese sailors undressed down to their underwear and kept coming. One boat tossed wood into the water ahead of the Impeccable, forcing it to stop. Two hours later, Chinese fighter planes flew low over the American ship.
The Impeccable's captain said Chinese harassment had increased markedly during the previous week, but he had no idea why. The Pentagon maintained that the Chinese have vastly under-reported their military spending and cloaked their intentions for years. Was the truth now starting to emerge? Was China's pesky aggression a sign of worse to come?
The following Friday, March 13, China's premier, Wen Jiabao, followed the military attack with an assault on America's credit-worthiness. "We have lent a huge amount of money to the U.S.," he said. "Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried."
With the U.S. Treasury rolling out ever more plans to borrow and spend, this was no time for one of the biggest acquirers of its debt to be making violent choking sounds.
Or was it the perfect time? With America on its knees, was this not the ideal moment to trigger the shift of power from Washington to Beijing? Would China now dump its U.S. assets, render the dollar worthless, and emerge triumphant from the wreckage of the global economy?
Get me Harrison Ford.
The truth may be more mundane--unless, of course, you are a keen follower of the patterns of global credit, in which case these are riveting times.
China's massive acquisition of American assets in recent years, from Treasury bills to corporate bonds and equities, seems to have many people spooked. The way they talk about it, you would think some tattooed goon, seconded from a Macao casino, had cornered Lady Liberty and was demanding she pay the vigorish. …