This is what the Washington Post reported in an article on a set of agreements negotiated by Treasury Secretary Timothy Geithner and the Chinese government, although it did not explain this point to readers. The article told readers that:

"The agreement included action on some long-standing issues — including initial moves by China toward opening its financial sector by allowing U.S. and other foreign firms to sell auto insurance, sell mutual funds and other investments, and underwrite corporate bonds."

The United States has also been pushing for China to raise the value of its currency against the dollar [thanks Downpuppy]. The over-valuation of the dollar against the yuan is the reason that the United States borrows money from China.

The high value of the dollar makes imports cheap, causing people in the United States to buy more imports from China. It also makes U.S. exports more expensive to people living in China, leading them to buy less of our exports. The resulting trade deficit is financed by borrowing from China.

Many politicians have sought to appeal to racist sentiments by citing this borrowing from China in their push to reduce budget deficits. The Washington Post has also followed this path in both its news and opinion pages. As long as the dollar remains over-valued, the United States will continue to run large trade deficits and continue to borrow from abroad, whether or not it has a budget deficit. (The foreign borrowing would be in the form of purchases of private assets or outstanding government debt, if the United States did not run a budget deficit in future years.)

When Secretary Geithner or other U.S. officials negotiate with the Chinese government they place priorities on their agenda items. Obviously Mr. Geithner placed a greater priority on gaining increased access for the financial industry (i.e. the big Wall Street banks) than he did on lowering the value of the dollar and reducing foreign borrowing.

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