Jan. 21 (Bloomberg) -- China’s economy overtook Germany’s to become the third-largest in 2007. Japan may be next to be leapfrogged, if China can sort out its relationship with the U.S.
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At least $650 billion of China’s $1.9 trillion of reserves are in U.S. Treasuries. A move to sell those assets would boost interest rates and further damage China’s export industries. Mutually assured economic destruction limits options and leverage in Washington and Beijing. President Barack Obama should act fast to hold this arrangement together.
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The U.S. and China should do the global economy a favor and formalize the G-2 process.
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The U.S. economy is worth $14 trillion, while China’s is worth $3.3 trillion. The G-7 was yesterday. The G-2 is today and tomorrow. It’s time for folks in Washington and Beijing to stop pointing fingers and get to work.