Obama, Hu Avoid Discussions of U.S. Indebtedness to China

President Obama and Chinese leader Hu Jintao discussed a wide range of issues during the president's visit to the communist nation, including climate change and Iran's nuclear program. But there's one issue aides say the two leaders didn't talk about: China's holding of $800 billion in U.S. treasury bonds.

"The $800 billion never came up in conversation, and the president dealt with every issue on his agenda in a very direct way and pulled no punches," said Michael Froman, Obama's deputy national security adviser for international economic affairs

China's ability to loan the U.S. that much money depends on its booming exports, which in turn are booming because other countries' money goes farther in China since the value of the yuan, in which Chinese workers are paid, is kept artificially low.

It's not a perfect marriage, economist Robert Scott says.

"We've become reliant on Chinese capital and the Chinese have become reliant on their exports to the United States," he told Fox News. "That's a relationship we both need to escape from. We need a divorce from that relationship."

Chinese-made goods are cheaper in this country than they would be if the yuan was properly valued. But since the U.S. not making the goods, economist Peter Morici says the U.S. pays for the difference in jobs.

"Overall, the combination of China and other Asian countries' currency manipulation and protectionism has cost the United State 3 million jobs in this decade," Morici said.

That is forcing American workers to retrain or take lower-paying jobs and sometimes both. Their complaints may not seem so loud when the unemployment rate is 4 percent, but they are loud and clear when the jobless rate is 10 percent and climbing.

Some economists believe the threat of tariffs would force China's leaders to assign a more reasonable value to the yuan.

"We merely have to empower the president and threaten China and other currency manipulators that if we don't change their behavior they will face sanctions," Scott said. "And that threat alone will do the job."

Economists say China won't cash in its dollars because that would lock in its losses and drag down the economy of its biggest trading partner.

China's economic model calls for moving 100 million peasant farmers to cities in the coming decade, and it depends on continued exports. But it could have a global impact.

"If China moves 100 million people from the fields into factories for exports," Morici said. "It will wipe out every manufacturing job in Europe, North America and the industrialized world."

Without those exports, China would have tens of millions more unemployed each year. That's a recipe for trouble, and economists say loaning other countries the money to buy their exports is China's investment in political stability.

Wendell Goler serves as a senior White House and foreign affairs correspondent for Fox News Channel (FNC), joining the network in 1996.