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A Chinese bank teller counts 100 yuan notes at a bank in Shanghai - 


BOB MOON: The White House has announced that Hillary Rodham Clinton's first trip as secretary of state will be to Asia -- including, of course, China. America's dealings with the Chinese could be the most important relationship in the global economy.

But the new administration is off to a prickly start. Treasury Secretary Timothy Geithner angered Beijing last month with accusations the country's been tinkering with the value of its currency to boost Chinese businesses. And then there's the grumbling that China even helped cause our financial mess.

Let's look into all this with Marketplace's Scott Tong in our Shanghai bureau. Hey, Scott.

TONG: Hi, Bob.

MOON: So how, supposedly, did the Chinese cause our troubles?

TONG: Well, here is the "blame China" camp. And, obviously, this is the over-simplified version, assuming the U.S. and China are the only two countries on the planet. But it goes something like this:

I'm here in China and I'm selling you a bunch of stuff, right? I'm selling you running shoes. But I undercharge you because I have cheap labor and the government gives me subsidies -- perhaps the currency is undervalued. So, you pay a low, low price and you actually buy more than you otherwise would. And in return you send me a whole bunch of U.S. dollars. Now, what do I do with those U.S. dollars? I send them back to the States. I lend them back to you. Which does a couple of things, right? That's a whole bunch of easy money coming from China, which pushes interest rates down, helps to keep inflation down. And it also encourages you to buy a bigger house. And, boom, there you have a big ingredient in the housing bubble. Fueled, according to this argument, by cheap Chinese credit, cheap Chinese goods.

MOON: Well, that's all well and good, but it doesn't really explain the whole story here, does it? We've got bad regulations, bad bankers, bad decisions . . . So, it's not just all on China's shoulders.

TONG: That's Beijing's argument that, you know, "You people got drunk and you're blaming the bartender? I mean, c'mon." That's what they're saying. And the other point China makes is this has not been a very good relationship for China, either, right? If China keeps staying addicted to exports, that's not necessarily a healthy way for the economy to grow. It means the factories stay in China, belching stuff into the air. So, China's point is it's this co-dependency relationship that neither side really likes that much. And they take offense at this.

MOON: But all this is history right now. We're looking back at that. So why does any of this matter looking ahead?

TONG: Well, what you could have is the finger pointing means tempers flare and then we move down the slippery slope of protectionism and trade wars. I mean, if we take these runnings shoes that you and other Americans buy, if Uncle Sam slaps this trade tariff on it, suddenly the price goes up and that's not really juicing the economy and encouraging consumption, is it?

MOON: And how bad could this get. I mean, China does have skin in the game here.

TONG: Well, that's right. It holds about $1 trillion in U.S. debt. And if it takes too much offense, one scenario is it could start selling off that debt, triggering a crisis in the value of the dollar. Now, on the other hand, if it dumps all its investments, it hurts itself because the value goes down. Also, China isn't the only investor in Treasury bonds in the world. Americans buy Treasury bonds, central banks in other parts of the world buy Treasury bonds. So, China matters, but perhaps not that much. Now, for now, most people don't think we're even moving toward that direction. The top policy makers in Beijing seem to understand that these political dust-ups happen from time to time. And it doesn't seem like they're bound to say or do anything stupid right now. And the Americans are backing away from things that have offended China. So, for now, adult supervision seems to be the tone of the conversation.

MOON: We can hope everybody realizes we're all in the same boat together, huh?

TONG: Right.

MOON: Marketplace's Scott Tong in Shanghai. Thanks for joining us.

TONG: Thanks, Bob.