The Asymmetric Interdependence Research Of Financial Relations Between China And United States

Long before the crisis began, the deepening economic interdependence betweenChina and the United State had prompted the term Chimerica to reflect the degree ofthese connections. Much of this centered around the trade and financial imbalances ofthis relationship, with the large Chinese trade surplus whit the United States offset bythe willingness of the Chinese to hold U.S. dollar-denominated assets, especially U.S.government debt. The financial crisis has only accentuated this relationship: U.S.budget deficits have tripled from an already very high level and the threat of adeclining dollar or even a downgrading of U.S. debt increases. A crucial and unusualfeature of this relationship—the financial part of it—is that almost all Chinesepurchases of U.S. Treasury bonds are by the Chinese government and not by privateChinese actors.Moreover, the massive Chinese current account surplus is partly a result of theexchange rate policies of the Chinese government that produce a close but not fixedexchange rate between the Chinese currency—the renminbi—and the dollar. Anassociated strategy is to rely primarily on a financial solution, mainly through asignificant shift in exchange rate. China has long maintained a controlled exchangerate, mostly pegged to the U.S. dollar but occasionally allowed to adjust. The UnitedStates has threatened to define China as a currency manipulator and has attempted topressure China to let its currency rise to a market-based level. Should this happen,rising prices of Chinese exports and falling prices of exports could rebalance some ofthe trade gap.But the most important and lasting consequence of the financial and economiccrisis will be the altered relationship between the United States and China. Theenormous accumulation of wealth in China, coming at the expense of U.S.consumption, is an unprecedented event in global affairs. Even more significant, theglobal economic crisis is an important event in the longer-term power shift betweenthe United States and China. This is not a simple “China up and U.S. down” process.Instead, it is better seen as a shift from asymmetrical interdependence favoring the United States, in which U.S. structural power determines outcomes, to a system ofmutual dependence, with growing Chinese structural power partly offsetting that ofthe United States. Moreover, the almost certain diversification of China’s financialassets away from the dollar will undermine the power of U.S. financial market. Chinais likely to be able to rebalance the structural advantages of U.S. monetary power as aconsequence of reducing global imbalances.This article is researched from five parts. The first part is about in theory. Itmainly uses Robert Keohane interdependence theory to show that the asymmetricinterdependence is the source of the power. At the same time, it also analyses theresult of asymmetric interdependence in theory, and the possibility of power transfer.The second part of this article discusses the representation of asymmetricinterdependence between China and America in finance. It mainly shows the currentsituation of asymmetric interdependence between China and America in the basicadvantages and constructional goals.The third part shows the source of power of asymmetric interdependencebetween China and America in finance. This part applies the comparison methodwhich is about the difference in basic finance resource between the two countries totestify that American finance is worldwide and lead to the external imbalances ofChinese finance. This is the source of power in American finance area.The following part is the influence of the asymmetric interdependence on Chinaand America. It respectively shows the influence in China and America. Every sectionrespectively demonstrates the influence in two sides. It obviously shows that thepower is not static and it is always transferring in this kind of asymmetricinterdependence.The final part is some suggestions about the construction of finance. It elaboratesthe simple suggestions from the domestic financial reform， international financeconstruction and cultural financial and military finance. According to this, the authorhopes that the China finance and even the national comprehensive strength canstronger, for building the powerful nation.