Demystifying China and U.S. debt
January 18th, 2011
08:38 PM ET

Demystifying China and U.S. debt

Despite what talk radio and late night comedians may say, China does not own the U.S. Treasury Department. Numbers show that 75% of Uncle Sam’s growing debt is in the hands of U.S. interests.

Of the international lenders, China is owed the most, just under $900 billion. But with America’s debt approaching $14 trillion, that’s not even 7% in Chinese hands. Of course, if China were to suddenly call in its notes, it would cause chaos to the U.S. economy.

But Christina Larson, a China analyst with the New America Foundation, says Beijing and the rest of the world still consider taking on debt from the United States a safe bet.

"China needs a place to park its capital and there’s no place that's as stable, easy to purchase and feel safe in as the United States."

Yes, Uncle Sam pays its interest, even if it has to borrow to do so. And, of course, with our stores filled with many goods made in China, the trade deficit has become a political hot potato. Yet, while China is the largest exporter in the world, the CIA Factbook reveals Germany is a close second, with the United States the No. 3 exporter, less than $200 billion behind China.

The outsourcing of manufacturing to China gets a lot of play in the United States, where fewer things are stamped “Made in America.” Experts say many of those jobs will never come back.

One nagging issue is the notion that China keeps its currency low to make its goods considerably cheaper to U.S. consumers. It’s a valid point that Beijing addresses every so often. President Barack Obama will, no doubt, push Chinese President Hu to do more on that front.

Hu also has domestic conundrum to deal with, analyst Christina Larson said. China has "to absorb millions of people every year into the labor market to prevent the dreaded social unrest," which will always be the top priority of the Chinese government, she said.

"They have an oversupply of people at this moment who've graduated from colleges and aren’t able to find high skilled jobs. An interesting fact that between now and 2030, there’s expected to be about 350 million people who move from the countryside to cities in China. That’s more than the entire population of the entire United States."

With the U.S. a much smaller market, in terms of population, China must turn inward to create a better consumer climate so Chinese people with extra money can buy the things they make, Larson says.

Click the audio link to hear the complete story:

subscribe itunes

Post by:
Filed under: China • Economy
soundoff (168 Responses)
  1. RUFFNUTT

    i was wrong.. 1 trillion and a gazillion.. i feel better now.

    i think im going to marry a chinnese girl just in case so when they call in the debt i can keep my camaro.

    January 18, 2011 at 8:44 pm | Report abuse |
    • Mmmmm

      I wondering when you was gonna drive that camero again.

      January 18, 2011 at 9:54 pm | Report abuse |
    • anonymous

      I beat you to it. Although I had a Firebird.

      January 19, 2011 at 8:07 am | Report abuse |
    • Me

      I think we should ask China to ship over all their old bicycles, we're gonna need em.

      January 19, 2011 at 8:35 am | Report abuse |
    • Chedar

      I like those old bike the Chinese are trading for American cars. It will be very useful in bike city like Palo Alto and Berkeley, CA

      January 19, 2011 at 9:36 am | Report abuse |
    • breeze68

      We should ride all their old bicycles, maybe then some of the fat asses in this country could lose some weight.

      January 19, 2011 at 10:18 am | Report abuse |
    • bailoutsos

      "As Washington deficit hawks scour the federal budget for ways to trim the size of government, they are arriving at one idea with increasing frequency: Put government property on the auction block.' --- Hu is here to check out buying the White House. China has already bought Congress.

      January 19, 2011 at 3:36 pm | Report abuse |
    • RSAn

      China cannot "call" the debt. The United States is not required to repay the Treasury Notes until maturity. What China can do is sell their notes on the secondary market at a discounted price than they paid. That may have a greater negative effect on China than the US. Additionally, when the US has needed to, we turn to ourselves for debt relief. This was the case during WWII and will be the case again. We could retire our debt if we really wanted to make the harsh choices required to do it, but it will not thappen until we are forced to take action.

      January 19, 2011 at 4:54 pm | Report abuse |
    • Sandra B

      Her father might end up with your camero.

      January 19, 2011 at 5:34 pm | Report abuse |
    • Sandra B

      Ruffnut: better check the dowry clause.

      January 19, 2011 at 5:35 pm | Report abuse |
    • Sandra B

      Do they sell the women there too? They kill the girl babies. Seems like women would have to go along with that. Maybe life is pretty bad there. They might be looking for a new planet with oxygen more than we are...and it's pretty bad here.

      January 19, 2011 at 5:38 pm | Report abuse |
    • govidgo

      China owns the US... he probably gave Obama that suit to wear. Surprised he didnt bow again.

      January 19, 2011 at 7:07 pm | Report abuse |
    • hankwill

      "Between now and 2030, 350 million Chinese are expected to move from the countryside into the city.Thank God we(USA) donot have a common border with them.By the way in 1969(before Nixon)I was killing Chi Com soldiers on the border of South Vietnam.And what of the Chinese businessmen who openly expressed their"joy"on 9/11.WakeupChildren.

      January 19, 2011 at 7:11 pm | Report abuse |
    • sure

      No, China doesn't own U.S. – They do too. Just ask the republicans who comment.

      January 19, 2011 at 7:14 pm | Report abuse |
    • Kite flyer

      There are no Chinese women available. The rich elite have them all and the Chinese workers will be single. All the one child parents want a male to continue their legacy. Mao was an idiot, and this is what you get for listening to an idiot.

      January 19, 2011 at 7:28 pm | Report abuse |
    • Kite flyer

      How many Chinese posters does it take to make a joke about the US needing their old bicycles? Looks like 3 in this one article alone. First of all, no thanks. We have the good stuff here. And second of all, you can keep your junk cars that kill passengers from the slightest impact.

      January 19, 2011 at 7:30 pm | Report abuse |
  2. Scotty

    Yeah I feel much better now. Let's just keep spending and spending. Keeping this same line of thought, I should just get a thousand credit cards and run them all up to the max, afterall I won't owe any one card more than the other, so all is well.

    January 18, 2011 at 8:48 pm | Report abuse |
    • Jorg

      Exactly! You make a good point.

      January 19, 2011 at 10:19 am | Report abuse |
    • wjk

      You should buy a commodity with all that credit you are running up in anticipation of the devaluation of the dollar. Something that will hold it's value thru the plummet of the currency... Platinum, Gold, Silver... maybe even grain of some sort(storage fees).... Diamonds - don't even consider that...

      January 19, 2011 at 7:01 pm | Report abuse |
  3. Scotty

    And if I do have to cut back my speding I'll first cut my food down (gov cuts police) then my power and water (gov cuts firemen) and if that's not enough I'll get rid of my clothes (gov cuts teachers/schools). Never mind the cable, cell phone,video games,starbucks,etc. that stuff is non-negotiable, right politicians ?

    January 18, 2011 at 8:54 pm | Report abuse |
    • just me

      i beg to differ , have you noticed the declineing infrastructure ?so what do they do with our taxes? oh yea war!

      January 19, 2011 at 3:49 pm | Report abuse |
    • Sandra B

      Just me: I see what you are seeing also. Where did our money go?
      Scotty: I see that also.

      What was the breakdown on other "US interests" that own our debt again? Is it some oil bank from some other country? what ones? saudi? (Still trying to see the big picture.) are we at war for them? none of this made sense from our perspective.

      January 19, 2011 at 5:24 pm | Report abuse |
  4. John Baynor

    RIGHT!

    January 18, 2011 at 8:58 pm | Report abuse |
  5. RUFFNUTT

    when the redo the usa flag to the usc flag will it have 1 star or 51 stars? also will it be moslty red?

    January 18, 2011 at 9:12 pm | Report abuse |
    • Mmmmm

      Okay thatta be a -1 for you have never served in military!

      January 18, 2011 at 9:58 pm | Report abuse |
    • RUFFNUTT

      china only has 1 star on there flag.. we have 50.. so when it's the united states of china will it be 51 or 1 ?

      January 18, 2011 at 10:03 pm | Report abuse |
  6. Eggdrop

    It will have 3 stars,they will include arizona,hijack ciudad juarez,flag will be red but will have cheery smiley face....

    January 18, 2011 at 10:07 pm | Report abuse |
  7. waldo

    ***7% is so little and eggdrop do u like art. I play chinese checkers on line wanna play me I will beat u ha ha

    January 18, 2011 at 10:26 pm | Report abuse |
  8. Eggdrop

    Mostly obscure southwest artist's Susiehyer,Anna Hills.Your offer is tantalizing....perhap's when I finish this match of Mongolian Stratego,we can meet.....

    January 19, 2011 at 12:44 am | Report abuse |
  9. Roberet

    "They have an oversupply of people at this moment who've graduated from colleges and aren’t able to find high skilled jobs." .... sounds like the USA – we need to re prioritize America – get the jobs back here – buy from here – and be secure in our own country. Hope they enjoyed that fabulous dinner paid by the tax payers.

    January 19, 2011 at 8:08 am | Report abuse |
    • Wayne Schmand

      The difference is that China thinks of it's own internal problems first. They'll go to great lengths to keep these white collar worker employed. That's much more then Washington does for anyone in America.

      January 19, 2011 at 8:35 am | Report abuse |
    • Anthony

      This is the wrong mentality. The high skilled jobs are not here in the US primarily because the highly skilled workforce is increasingly elsewhere.

      Look at any scholastic rankings from the last decade, and you will see that we need to prioritize education NOT "getting the jobs back here". People here at present are largely NOT prepared to do the work. Education and THEN jobs.

      January 19, 2011 at 11:34 am | Report abuse |
    • Sandra B

      Industry was telling us that they couldn't find the right skill sets (still true). And schools kept justifying tuition costs by telling us that we were supposed to be making millions more than someone without an education. Really all we got was a huge bill and no jobs to pay it off.

      January 19, 2011 at 5:32 pm | Report abuse |
    • dave

      I believe China is buying more such notes under our administration's request, since we put many of our armed forces around the China border, and we can suck their blood dry if we need to. We are the only real super power, aren't we?

      January 19, 2011 at 8:04 pm | Report abuse |
  10. drcoltrane

    If China called in all notes, there would be chaos in the U.S. Economy for about 2 months before congress declared war against China, and then voila: we have WWIII. It won't happen.

    January 19, 2011 at 8:13 am | Report abuse |
    • Wayne Schmand

      What's this call in the notes business? It's sovereign debt, not like you can go the Treasury and demand money back. At worst you can sell them and not buy more debt.

      January 19, 2011 at 8:40 am | Report abuse |
    • Edward

      Wayne your correct, you can't call in a bond. People are missing a much bigger point. During the cold war the theory of MAD was alive and well (mutually assured destruction) We now have economic MAD. First the Yuen is pegged to the US dollar so how the dollar goes so goes the yuen. Now they can unpeg it, but there currency goes up and the whole world then goes to buy their cheap crap in Vietnam, Cambodia etc. Now even if they could go after the US economy. The US is there biggest trading partner, crushing their own economy, Europe would stop trading with them as the dropping US dollar leading to a dropping Yeun would mean no one will be buying Mercedes and for that matter Airbus. as if the US dollar lost 50% of its value it doubles the price of European products. So Europe would probably try and by up US bond to keep the dollar up (odd thought). China is every bit as economically dependent on the US as vice versa. And for all those who call a different opinion (read thought out opinion) 'propaganda', just because you can't understand it, it does not mean the Freemasons/Illuminati/aliens are behind it.

      January 19, 2011 at 4:03 pm | Report abuse |
  11. Sue

    That must be what the meeting was about....since they own the house they have come to remodel it.

    January 19, 2011 at 8:14 am | Report abuse |
  12. Bob

    One day we must pay the piper.

    January 19, 2011 at 8:41 am | Report abuse |
    • BigBen

      Yeah. We'll have to pay the bonds when they mature. Let's say China didn't own any of the bonds and only US citizens did, would the situation be different? We'd still have to pay them once they mature.

      January 19, 2011 at 8:46 pm | Report abuse |
  13. Dan Bednarik

    Keep building nuclear weapons.

    January 19, 2011 at 8:48 am | Report abuse |
  14. get a job

    OMG most the comments in here are dumb !!..... GET A CLUE PEOPLE !!!!

    January 19, 2011 at 8:50 am | Report abuse |
    • Barry

      I guess we can't call your statement dumb as it has zero content.

      January 19, 2011 at 5:52 pm | Report abuse |
    • dave

      I agree with you, though the most folks are not that prestige or sophisticated, we american only has few than 300 hundred years history, our food system made us in very short memory and quite naive of in comprehension of political science. We need a true leader other than the ones misleading this great country. Please visit Ronpaul.com to see the answers.

      Last night, did Mr. President double-ordered the jumbo lobsters for the Chinese guests and pay the tips in Chinese RMB Yuans?

      January 19, 2011 at 8:22 pm | Report abuse |
  15. Kamlesh. Patel

    Use more products and produce of our own USA,rest give it to the World.

    January 19, 2011 at 9:13 am | Report abuse |
1 2 3 4 5 6 7