Obama plays China card, but who holds the ace in sino-America ties?

But in a sense, no one buys American like Beijing —at least when it comes to investing in debt securities.

Having amassed some $800 billion of US Treasuries, China is the largest holder of the US government debt, giving Beijing new leverage over Washington but also making their economies more closely intertwined than ever.

In what some US analysts saw as a “shot across the bow” of the United States this year, Chinese central bank governor Zhou Xiaochuan called for the creation of a super-sovereign reserve currency, all but saying the US dollar’s days as the world’s preeminent currency were numbered.

He made the suggestion in an essay published a week before the London Group of 20 summit.

Clearly aiming at an international audience, the central bank took the unusual step of publishing the paper in English at the same time as it issued the Chinese version.

“The central bank’s discussion really did reflect China’s anxieties about its massive forex reserves, the depreciating dollar and US monetary issuance,” said Dong Xian’an, chief economist at Industrial Securities in Shanghai.

China fears US authorities will be tempted to “monetize the debt” by allowing inflation to rise, eroding the value of US-dollar denominated assets held by the Chinese.

Premier Wen Jiabao put it bluntly when he spoke in March at the most important Chinese press conference of the year: “We have lent a massive amount of capital to the United States and of course we are concerned about security of our assets. To speak truthfully, I do indeed have some worries.”

He urged America to maintain its “creditworthiness” and safeguard Chinese assets, a lecture that did not go unnoticed.

Chinese officials have taken umbrage at some suggestions that China’s high savings rate contributed to the global imbalances.

Some private-sector US analysts say massive capital inflows from China helped fuel the housing bubble that set the stage for the financial crisis.

Zhou said in September that the paper about the dollar had been partly a way of rebuffing such criticisms.

But the central banker’s proposal hit a nerve.

Persistent complaints from Washington about the Chinese currency have long been a source of friction.

Moreover, the dollar has been sliding lately and public comments about the possibility of it losing its stature could reinforce its weakness, posing dangers for both China and the United States.