If there were ever any doubts, the visit to China later this week by U.S. Secretary of State Hillary Clinton is likely to drive home the point that there is more to the global economic crisis than just the collapse of the U.S. housing market and the related tide of mortgage and other loan defaults.
In fact, the U.S. economy has been weaker than many people realized for a long time, and the housing-market collapse was simply one symptom.
The larger story has very much to do with the U.S.-Chinese trade relationship -- a subject so important that Clinton is making China one of her first destinations since becoming secretary of state.
The U.S.-Chinese trade relationship is quite simple. China produces, America buys what it produces, and China reinvests its earnings in America. And that enables Americans to buy more.
The relationship has lasted long enough that some wags have called China and America a single country and dubbed it "Chimerica." The label, a pun on the word "chimera," refers to a bloc that composes just 13 percent of the world's land but holds one-quarter of its population and accounts for one-third of its economic output. Heyday As History
For a long time, the U.S.-Chinese partnership looked to some like a golden formula. Between 2002 and 2006, the booming trade accounted for about 60 percent of global growth.
China's exports increased at rates of 35 percent annually, while its economy grew at around 10 percent a year, lifting huge numbers of people out of poverty.
For the United States, it meant an endless flow of consumer goods at a fraction of the price they would cost if they were produced in the West. As Chinese factories multiplied, the output of cheap products spilled over to the rest of the world as well.
Meanwhile, China's reinvestment of its earnings in the U.S. and European stock markets and government-backed bonds flooded the West with additional capital.
So much money poured in that banks could lend to Western consumers at ever lower rates. And that encouraged consumers to buy more and borrow more and buy more until -- finally, they borrowed more than they could repay.
"The United States has something like a $700 billion current-account deficit last year, something like 5 percent of our [gross domestic product]," says Charles McMillion, an economist who heads MBG Information Services in Washington. "Over the last eight years, the U.S. current-account deficit has totaled just about exactly $5 trillion."
The current-account deficit is the primary measure of how much more Americans spend on foreign goods and services than they themselves produce or sell abroad.
At a daily rate, the amounts McMillion cites translate into Americans spending about $2 billion a day more in foreign trade than they earn.
Even before the start of the U.S. recession in December 2007, many economists were warning this rate of spending more than you earn was unsustainable.
Now, exacerbated by banks' losing vast amounts in the housing market and by speculation in the stock market, the unsustainable has become the catastrophic. U.S. Options
Clinton's priority will be to try to reassure the Chinese that they should keep investing their money in America. That would help the U.S. government finance its some $3 trillion worth of measures intended to revive the U.S. economy.
But convincing China to keep investing may not be easy.
The Chinese already has some $682 billion worth of savings in America in the form of U.S. government bonds.
Chinese officials worry now that the value of those savings, as well as the nearly $2 trillion worth of foreign currency, mostly American, that Beijing holds, could erode if Washington lets the U.S. dollar get too weak.
Beijing could demand -- as a condition for more investment -- that Washington promise to support the dollar's exchange rate. That would also preserve the current between a strong dollar and a weak renminbi, the Chinese currency, which keeps China's exports irresistibly cheap for many American consumers.
It may not sound like much to ask. But, in fact, it represents a major reversal in the previous relationship between the two countries.
In recent years, U.S. officials have repeatedly asked the Chinese for just the opposite: to let the renminbi strengthen against the dollar. Washington hopes for a stronger renminbi to drive up the price of Chinese products and reduce Americans' demand for them.View From Beijing
If all this sounds as if China now holds the advantage in the game, that is not entirely true.
Beyond safeguarding its investments in America, its foreign-currency reserves, and the cheap price of its exports, China has to protect a large part of its industrial sector that now is geared solely to foreign trade.
McMillion says that without foreign trade, there is nowhere for China's industrial surplus production to go.
"They produced last year over $400 billion, or 12 percent of their GDP, more than they themselves can consume," McMillion says.
China's global exports fell 17.5 percent in January compared to the same month last year -- the sharpest drop in a decade -- as a result of the recession in the West. That could provide a warning sign to China that it cannot risk fueling protectionist sentiment in America.
Perhaps the best way to characterize the mutually dependent relationship of China and America today is as equal partners in crisis.
It is an odd partnership between the world's last great communist state, with its mixed command/free-market economy, and the world's foremost capitalist power.
Until now, the partnership's functioning has relied upon easy credit and ever more debt in the United States -- a period that now is clearly over.
But what the next chapter in the relationship will look like has yet to be determined.