China, Japan and Korea

The three largest Asian economies are building a regional financial alliance in order to weather the current financial storm. The three prime ministers met this week in Tokyo to cement this partnership.

Historically this is a significant milestone as China is partnering with its former enemies - Japan and Korea. They are not waiting for a new agreement with the US but are proceeding to align themselves regionally.

The three countries will increase currency swaps in order to facilitate trade. They will establish financial partnerships which will increase their inter dependency over the next one to two years. This will have long term impacts on the global economy as the Asian block becomes more reliant on itself rather than looking to the West for answers.

At the same time China has continued to purchase US treasury bonds. it is maintaining its leading position as the largest buyer of US treasuries.

China's US treasury holdings now total more than $652 billion USD. Japan is second with $585 billion followed by the UK with $360 billion.

The combination of a growing Asian regional cooperative strategy and China and Japan's treasury holdings means that Asia continues to be the key force financing the US national debt. This will assure them a place at the global "table" as the current recession bottoms out and recovers in the coming years.

China is not just an exporter of low end products. It is also the largest financial anchor for the growing US debt burden.