For nearly two decades, the United States and China have held each other in an awkward but mutually beneficial economic embrace. Despite the countries' political differences, American consumers gobbled up Chinese-made goods, while China piled up billions of dollars from U.S. trade.
The arrangement worked for years. But recently, under mounting pressures from the global economic crisis, the financial relationship between China and the U.S. is beginning to look like an unhealthy co-dependency. China holds so much of its foreign reserves in dollar-based assets that it is now vulnerable to shifts in the U.S. economy. And the U.S. has allowed China to purchase so much of its debt that it is now beholden to Chinese interests. Source: Knowledge @ Wharton, Wharton School of Business
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