New order:

The 30th anniversary of diplomatic ties between the United States and China was celebrated this month in Beijing — and at the New York Stock Exchange. Today there is no more crucial pairing of great powers. As Henry Kissinger observed at one of the celebrations, the United States and China today have “a common opportunity” to build a stable new world order “because the international economic system has to be rebuilt.”

Having for too long lived beyond their means, Americans have become heavily reliant on China to finance the US national debt. China’s dollar holdings are close to $2 trillion. As China seeks to stimulate its own economy, it will inevitably need to spend more at home, save less, and park less of its foreign reserves in US Treasuries. Such a change of direction could harm the US economy badly, forcing an increase in interest rates at the worst possible time.

So the need for cooperation is mutual. Americans need to emulate the Chinese by saving more and producing useful goods instead of phantasmagorical financial derivatives. For their part, the Chinese need to save less and sell more into their domestic market.

The two powers will continue to have differences. But they depend so

much on each other that they have little choice but

to forge a new world order together.