March 19 (Bloomberg) -- If Chinese Premier Wen Jiabao is so worried about the safety of China’s investment in U.S. Treasury securities, he can order the money be moved elsewhere.

Of course, that likely would drive down the value of the dollar, push up U.S. interest rates and cause huge losses in China’s $700 billion portfolio of Treasuries.

The reality is that Wen and China are stuck. They have no viable alternative so long as China continues to accumulate large amounts of foreign currencies as a result of its big trade surplus.

Chinese authorities took offense when Treasury Secretary Timothy Geithner, during his confirmation hearing on Jan. 21, accurately labeled China as a currency manipulator. Wen’s gratuitous and inaccurate remarks about U.S. assets are just as offensive.

“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets” Wen said during a March 13 press conference. “To speak truthfully, I do indeed have some worries.”

The U.S. isn’t about to default on its government debt, and Wen knows it.

So that leaves the more mundane risks -- higher interest rates or a weaker dollar -- associated with any fixed-income investment denominated in a foreign currency. And China reduces even those risks by artificially holding down the value of the yuan relative to the dollar, to preserve its large trade surplus with the U.S.

Trade Surplus

If China’s purchase of Treasury securities is important to the U.S., continuation of a big trade surplus is more critical to China -- something Wen conveniently forgets. The trade surplus is critical if China is to come close to achieving the 8 percent growth target Wen has set for this year.

There is, it should be said, much truth to some of Wen’s charges, such as his comments in January that the U.S. was responsible for the worldwide economic and financial crisis. He complained that the U.S. had followed “an unsustainable model of development characterized by prolonged low savings and high consumption,” along with a “blind pursuit of profit” and inadequate financial supervision.

On the other hand, Wen might have paused to ask himself what China would have achieved with its high savings, low consumption and undervalued currency approach to development if the U.S. had not been there to absorb China’s exports.

In January the U.S. deficit in goods trade with China was $20.6 billion, just shy of half the total U.S. deficit of $43.8 billion.

Federal Reserve Chairman Ben S. Bernanke believes that a considerable share of responsibility for the financial crisis lies in a “savings glut” in China and other developing nations that drove down long-term interest rates for many years.

Lectures by Creditors

Pointless lectures from creditor nations are hardly new, of course. Under the Bretton Woods system of fixed currency values anchored by the dollar, nations with surpluses supposedly had the same responsibility as those with deficits to alter their economic policies to adjust the imbalances. It rarely worked that way.

More recently, nations in surplus, such as those in Europe, ignored the reality that smaller U.S. trade deficits would diminish their surpluses.

Now that’s exactly what is happening, and it’s a key part of the spread of the economic crisis around the world. As U.S. growth slowed last year and then took a nosedive in the fall, imports of non-petroleum goods also plummeted. In January, at $111 billion, such imports were off $24 billion from January 2008.

With the help of lower oil prices, overall U.S. trade deficits are running about $20 billion a month less than they were a year ago. That’s $20 billion less that must be financed by borrowing from China or some other foreign nation.

Intertwined Economies

There will still be a large deficit to be financed, and China and the U.S. will still be intertwined both economically and financially. Wen must know that.

What he doesn’t seem to accept is that anything he and other senior Chinese officials do to raise questions about U.S. creditworthiness or the value of the dollar could come back to haunt them.

(John M. Berry is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: John M. Berry in Washington at jberry5@bloomberg.net

Last Updated: March 18, 2009 22:59 EDT