China Owns America: The Trillion Dollar Debt Express

Will China Dump U.S. Debt?

Written by Charles Scaliger

Friday, 13 March 2009

New American - China U.S. The Chinese government, to which the United States is in debt approximately $1 trillion, is preparing to use its leverage to exact concessions from the U.S. government. “We are concerned about the safety of our assets,” Chinese Premier Wen Jiabao said at a news conference March 13. “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

The Chinese Premier has ample cause for concern, given that one-half of China’s foreign currency reserves are held in U.S. government debt. Should the U.S. government default on its obligations, the result would be catastrophic for both countries.

But the United States should be more worried still. China — still a military rival — is now the United States’ largest creditor, and the only major country with enough money to purchase the huge amounts of additional debt the Obama administration is manufacturing to pay for trillions of dollars of bailouts and economic stimulus. This has come about in part because of the reversion of Hong Kong, which held large amounts of U.S. government debt, to Chinese control in the mid-1990s. But it is also a result of huge foreign investment in China and the comparative thrift of the Chinese government and citizenry. As a result, China has large budget surpluses where the U.S. teeters on the brink of national bankruptcy thanks to looming trillion-dollar annual deficits. Read more.