It’s official: Treasury Secretary Timothy Geithner is a laughing stock worldwide. While addressing students at Peking University in Beijing, his audience laughed loudly at the assertion that China’s massive dollar holdings are completely safe.

U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

A major goal of Geithner’s maiden visit to China as Treasury chief is to allay concerns that Washington’s bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China’s total U.S. dollar-denominated investments could be twice as high.

“Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

It gets worse. Geithner told the Chinese yesterday that the Obama Administration is committed to bringing down the U.S. deficit. Yeah, the Chinese found it as hysterical as you do.

Seventeen of 23 Chinese economists polled in connection with Geithner’s visit said holdings of Treasuries are a “great risk” for the nation’s economy, according to a Chinese state media report yesterday. Still, the majority argued against quickly cutting them, the Beijing-based Global Times reported.

Geithner, 47, needs to show how the U.S. can prevent the value of China’s investment from being eroded by a weaker dollar or by the inflation that might be stoked by the stimulus money being pumped into the U.S. economy, according to Yu.

“It will be helpful if Geithner can show us some arithmetic,” he said.

As you can tell, China is extremely concerned. And its concern is entirely warranted. The U.S. is borrowing fifty cents out of every dollar it spends, the deficit is growing exponentially, the CBO just increased its estimate for 2009′s deficit, our national debt exceeds $11.3 trillion, and there’s talk of our AAA credit rating being reduced. Any talk of a commitment to reducing the deficit or stabilizing the economy is, of course, laughable.