Some students wanted to know whether China's holdings of $768 billion of Treasury securities - which makes China America's biggest creditor - were safe, given projections by the Obama administration that the deficit for this year will soar to an astronomical $1.84 trillion, four times the previous single-year record.

Some students wondered whether the recent rise in interest rates was a signal that investors are beginning to worry that US budget deficits will threaten inflation, weaken the dollar and reduce the value of the Chinese holdings.

China's investments in the United States "are very safe," Geithner told the students. "We have the deepest, most liquid financial markets in the world."

He said the recent rise in long-term rates for Treasury securities was not a reflection of worries about rising US budget deficits but a reflection of the view by investors that the global economy is improving, which lessens demand for US Treasuries as a safe haven.

As far as spending large amounts of money to support Chrysler LLC and General Motors Corp. as they go through bankruptcy filings, Geithner said the administration was optimistic that government support would only be temporary. "We want to have a quick, clean exit," he said.

GM filed for Chapter 11 bankruptcy on Monday as part of an administration plan to shrink the automaker to a sustainable size with support from an additional $30 billion from the government's bailout fund.

Geithner also stressed to the students that the Obama administration would soon unveil a comprehensive overhaul of financial system regulations designed to fix the flaws exposed by the current crisis, the worst to hit the US economy since the Great Depression.

He said the changes would make federal regulations "smarter and more effective" by strengthening oversight of hedge funds and derivatives, consolidating and streamlining banking regulation and providing the government with the necessary tools to shut down large financial institutions that are posing a risk to the entire system.

"We have a lot to do, but we are going to fix this," he pledged.

Later, Geithner and other Treasury officials met at the Great Hall of the People with a team of Chinese economic officials led by Vice Premier Wang Qishan for discussions about the upcoming high-level talks in Washington this summer between the two nations.

At the start of the session, Geithner said, "The world has a huge stake in our two countries working closely together to lay a foundation for recovery."

Wang called the upcoming talks, which will replace the Strategic Economic Dialogue begun in the Bush administration, an "important initiative in growing the China-US relationship."

Geithner will wrap up his visit with meetings with Hu and Wen.

(China Daily via Xinhua)