This is the Cato Daily Podcast for Wednesday, April 14, 2010.

I'm Caleb Brown.

China's role is the banker, key trading partner and military rival of the United States

causes a lot of hand-winging and misinformation.

But the challenge posed by China should not be viewed so narrowly, according to Stephan Halper,

author of the Beijing Consensus, how China's authoritarian model will dominate the 21st century.

We spoke following a forum for the book last week.

Some fiscal conservatives see China as a threat in the sense that it has liberally extended credit to the United States

and a lot of people view that as having delayed days of reckoning that probably ought to have

occurred in the United States, if not now, maybe a few years ago.

And so they blame China for doing that when all those decisions were actually made in the United States.

But do you see beyond the investment value of the Chinese government extending credit to Uncle Sam

a strategic value for China holding

so many US dollars?

There's sort of two questions in your query. The Chinese are not extending credit to the United States because they wish to bring us down

And they are not

Extending credit in the form of

You can say, purchasing treasuries because they wish to have the option or in fact proceed to alter the value of the dollar.

They are investing in what they regard to be a very stable asset. And if they get one or two percent return on a stable

asset, given the If the Chinese were to cease the purchase of US treasuries, it could increase US interest

rates by approximately three quarters of 1%. If that were to happen I really do think we could

live with that because our response would be to slap punitive tariffs on their exports to the U.S. and impact

...