In China, Obama Meets America's Lender

As President Obama makes his way through China this, his visit may help to highlight an often-overlooked part of the U.S.-China relationship: China's role in propping up this country's massive debt. When it comes to the nations the U.S. owes money to, China is at the top of the list - and the numbers are staggering, as CBS News correspondent Hari Sreenivasan reports.

When President Obama meets with Chinese President Hu Jintao, there may be less lecturing and more listening because it is hard to talk tough on trade, Taiwan, and Tibet when you're sitting across the table from your biggest lender.

The Chinese own more U.S. government debt than any other nation - about $800 billion worth. And the U.S. pays China $50 billion a year just in interest.

"President Obama is concerned about taking China on on trade, the environment, and a whole host of issues," said University of Maryland economist Peter Morici, "because he's concerned China won't buy our bonds."

China is carefully watching how the Obama administration spends money on bank bailouts, expanding health care, and combating climate change - as any big investor would.

"Today, Beijing is asking the Americans very detailed questions about the health care reform, wanting to know how we spend every nickel they lend," Morici said.

While President Obama campaigned on the idea that China artificially keeps the value of its currency low - which makes Chinese goods cheaper and U.S. goods more expensive - this spring, the Treasury Department backed off issuing a report saying China "has taken steps to enhance exchange rate flexibility."

"What's changed really is China's weight in the world," said Evan Feigenbaum of the Council of Foreign Relations. "The capacity that China can bring to bear for good or for ill around the world is much greater. So the challenge of working with China in a whole variety of areas is much greater."

China's economy also suffered from the global recession and implemented its own stimulus program, which in turn could stimulate America's economy.

"It would offer more new opportunities for American exporters, because Chinese consumers with money in their pocket would be able to buy competitive American products," Feigenbaum said.

The fact is that the U.S. and China are inextricably linked. The challenge is turning common interests into complimentary policies.
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