“Over the past decade, huge quantities of short-term capital from China’s exploding exports have been injected into China’s banking system, enabling a shadow-banking system and resulting in a massive credit bubble and over-investment, by many accounts.
In the event of a crisis, China would most likely be forced to sell off its massive Treasury holdings, Friedman predicted, and the Federal Reserve should prepare itself for it. ‘After spending years attempting to insulate the U.S. economy from the upshot of its own banking crisis, the Fed may ultimately be forced to bail out China’s banks, too. This would fundamentally redefine — and, one hopes, rebalance — U.S.-China relations.'”
http://www.moneynews.com/Economy/Friedman-China-US-banks/2013/08/27/id/522382
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