When China confronted a U.S. Navy intelligence ship to protest its presence in contested waters, they did so with fishing boats, not the Chinese navy. There was a message in that.

The message was that China would look out for its interests, but we have too many parallel assets at risk to be able to afford a real conflict.

China owns a trillion dollars of U.S. securities and has $2 trillion in cash. China is the largest U.S. creditor and likely is the most liquid in terms of having an ability to provide additional cash where it is the most strategically beneficial to China and the world economy. As the first and second largest economies, what the U.S. and China do will dictate how long and how deep this “Great Recession” is.

Last week, China’s Premier, Wen Jiabao publicly expressed reservations over the safety of U.S. debt. “We have lent a huge amount of money to the U.S. so of course, we are concerned about the safety of our assets. Frankly speaking, I do have some worries.”

I don’t think I’ve ever seen or heard a faster response from any White House about anything ever than the response of assurances in the soundness of the U.S. economy poured out by President Obama and U.S. government officials. Beijing is this country’s biggest banker. China has expressed concern repeatedly over what they have seen as U.S. fiscal mismanagement and is voicing concern that rising debt levels could make U.S. investment a more risky affair.

When the U.S.’ biggest banker expresses concern in U.S. creditworthiness, other bond holders took that under close advisement.

A Treasury debt auction held last week had actually gone far better than most expected, until the Premier voiced concern. Risk bears a cost and with the need for record smashing sales of U.S Treasuries to finance record smashing deficits, the cost of that financing is set by the perception of risk as much as it is the availability of capital.

That’s another reason why President Obama and administration officials jumped on Wen’s comments, expressing confidence with such a firm response. The U.S. cannot afford to have lenders’ worried about U.S. creditworthiness. I don’t think that under current conditions the U.S. Treasury will be calling the Chinese any names like “Currency Manipulator” any time soon.

There is no one else ready to step up to replace China as a buyer of U.S. debt. While casting doubt on the U.S. ability to perform financially, Premier Wen said China’s own debt level was manageable because of conservative budgeting and reaffirmed Beijing’s belief that China would be able to maintain its 8 percent economic growth target despite the global recession.

China is stimulating domestic demand to compensate for the slump in exports, which was down 25 percent in February.

Remember that the money that China has to invest in U.S. debt is proportional to its export growth. If China still has a will to invest in U.S. securities, it will have fewer financial resources to do so with until the global economy improves.

China stimulates its economy by building roads, dams, ports, airports, to the point it has much newer efficient infrastructure, something the U.S. has fallen down duplicating.

China’s stimulus spending was bigger in relationship to GDP than ours and more focused on investing in hard assets – 8 percent of GDP versus 5.6 percent of GDP. China invested 40 percent of GDP last year in new factories and other assets.

China’s bank lending surged 24 percent in February, so they are priming the pump with more than one handle.

China’s Purchasing Manager’s Index topped 50 again (51.2) last month signaling new growth. With so much at stake with dollarized assets, China has a vested interest in a strong U.S. dollar.

Recent strength seen in the U.S. dollar didn’t slow China’s demand for U.S. ag production. Its strategic plan for raw materials doesn’t hinge on currency values. Were it not for China who has been buying extra soybeans, corn, rice, cotton, wheat for strategic reserves, these commodity markets would have suffered worse.

In the case of soybeans, Beijing’s programs have helped U.S. farmers more than U.S. policy makers have done.

The good news is that China raised its treasury holdings $12.2 billion in January, so that despite Wen’s concerns, Beijing is still lending. The bad news is that foreigners sold a net $60.8 billion in long dated U.S. securities with net foreign capital outflow of $148.9 billion in January.

China is still hanging in there with us, but others are repatriating funds. China has as much reason to be worried about that as the U.S. Treasury.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.