Obama defends U.S. economy amid Chinese worries

In an unusual defense of the U.S. economy, President Obama declared Saturday that the Chinese and other foreign investors can have “absolute confidence” in Treasury bonds and other American investments.

Obama, responding swiftly to Chinese worries about their trillion-dollar investment in U.S. government debt, said in a White House appearance with Brazilian President Luiz Inacio Lula da Silva that the American economy remained the most vibrant in the world and had continued to attract foreign money even amid the deepest recession in decades.

“Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States,” Obama said, defending the safety of U.S. government notes as well as private sector issues.

His comments came less than a day after Chinese Premier Wen Jiabao said in Beijing that he was “definitely a little worried” about Chinese holdings of U.S. bonds and that his government was watching closely how the United States deals with its economic troubles.

The exchange between the two leaders was an unusual public commentary on the soundness of an American economy that has rarely come under question from foreign leaders.

But it underscored China’s increasing influence over U.S. economic affairs and its growing desire to express its unhappiness with what it views as American mismanagement of the world economy. Economists read Wen’s remarks as a warning that American policymakers should not weaken U.S. currency as they accelerate spending.

Obama said that increasing purchases of U.S. bonds are “a recognition that the stability not only of our economic system but also our political system is extraordinary.”

Three weeks ago, Secretary of State Hillary Rodham Clinton in a visit to Beijing urged the Chinese to continue investing in U.S. Treasury bonds, which she said were sound. China’s foreign minister, Yang Jiechi, responded with the noncommittal reply that his government is always evaluating where it can best invest its money.

Obama repeated his pledge to reform the international financial system, saying that reforms would be “front and center” at the meeting of the G-20 group of largest world economic powers in London next month.

“We have to do financial regulation, and nobody’s going to be a more vigorous promoter of the need for a reform of our financial systems” than the United States, Obama said. He said that a number of moves were needed to restore the world economy but that “financial regulation is front and center in terms of the issues that we want to deal with.”

In a critique from a different perspective, Lula said he worried that the flight of money to the relative safety of American investments was hurting Brazil and the developing world.

“This is a problem we will have to discuss at the G-20 meeting,” the Brazilian said.

He said that world leaders should recognize the need to address the global social problems that had been heightened by the economic crisis. “We already see migrant workers facing many problems in different countries,” he said.

The two leaders said they discussed energy issues, including biofuels, expanding trade, joint work on Africa and increasing standards of living in Latin America. They said their meeting was friendly and productive.

Lula cited the “importance of President Obama’s election, what it represents to the world and especially to Latin America.” He said he told Brazilians, “I’m praying more for [Obama] than I pray for myself,” because of the challenges he faces.

Obama discussed a possible future trip to Brazil, joking that “I suspect the Republican Party would love to see me travel through the Amazon and maybe get lost.”

Obama administration officials have said that they intend to put more emphasis on Latin America than did the Bush administration and that they intend to work harder on integrating Brazil and the other largest developing countries -- India and China -- into the top tier of world powers.

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paul.richter@latimes.com