Buying up U.S. currency was the smartest move China ever made, Mahbubani says.

Question: Are China's U.S. Dollar reserves at risk of inflation?

Kishore Mahbubani:Well, actually, that is one of the most brilliant geopolitical moves that China has made. In the Cold War, you had one kind of MAD, mutually assure destruction, with the United States and Soviet Union, and MAD kept their relationships stable. China is developing a different kind of MAD with the United States of America. It's called "mutually assure dependence." So, China depends on the America for markets to export its products and America now depends on China for cheap money to buy treasury bills, to keep interest rates low and to keep the American economy humming. So, if America carries out any economic strike against China, guess what? America is hurting itself, right? So, this mutually assured dependence is a brilliant geopolitical move by China, which going to make the world a more stable place.

Recorded on: 2/28/08