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.

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Filed under: China • Economy
soundoff (168 Responses)
  1. conoclast

    If one needs a visual aid to bring home the US – Chinese trade imbalance Google the "Emma Maersk". It's a stupendously huge WalMart containership that reportedly makes the fully-laden voyage from China in 5 days - and then makes the return trip empty!

    January 19, 2011 at 10:03 am | Report abuse |
  2. StIves

    Ths is a supprise to man of as tax paers. We all have known that we loan billion of dollars all over the world; and to say other countries buy US debts and own part of the country; perhaps its interest rather than land or people. Anyway, nothing that the US does supprise me anymore; We the people of the US have been kepted in the dark since America has start it's overseas business and ventures. So, we just know nothing can be sure here in America.

    January 19, 2011 at 10:08 am | Report abuse |
    • Brownstain

      Gibberish

      January 19, 2011 at 10:32 am | Report abuse |
    • conoclast

      Ye gods man, what are you trying to say? Please back up and try again. (or is English not your native language?)

      January 19, 2011 at 10:49 am | Report abuse |
  3. BGLEN

    We should just call an end to this. Declare war on China, but that is after we borrow the 2 trillion to run that war, but wait, we will need new weapons, that won't work, and have costly overruns, plus we need to cut taxes – China make it 3 trillion, then we declare war on you. Of course if we win, we will need to rebuild your economy.

    January 19, 2011 at 10:17 am | Report abuse |
  4. Ajalbert

    What I'm conerned about is not the total amount of the debt but how often and how much are we required to pay it back. A perfectly normal debt to income ratio for instance would be if the amount you pay each month to all of your lenders iis less than 1/3 of the total monthly income. I can't find any information on what the United States monthly or yearly terms are for paying this debt or the total revenue for the United States would be during those periods. That may be the kicker, we may still be way above water and this huge number is relatively inconsequential. On the other hand, we may be drowning and not know it. May be worth while to try and get our Government to publish this iinformaiton.

    January 19, 2011 at 10:20 am | Report abuse |
    • Revolter

      the answer is that we owe ourselves and other nations 30 years of all the earning power of the US population. Without inflation being factored in.

      January 19, 2011 at 10:27 am | Report abuse |
    • Ajalbert

      That is not the answer. I currently owe more than I make in a year. This isn't what matters. The amount I am required to pay back per month is only a fraction of what I make iin that same month. I still qualify to be lent more, obviously the United States government is as well. We cannot demolish the credit system, it just needs to be managed appropriately. Until we have informaiton on how we are operating within the system, we cannot truly know how much of a problem 14 trillion is.

      January 19, 2011 at 10:36 am | Report abuse |
    • Prometheus

      very good question and response Ajalbert. I am interested as well in knowing this.

      January 19, 2011 at 10:42 am | Report abuse |
  5. GaGa

    I think we better start learning to read and speak Chinese.

    January 19, 2011 at 10:35 am | Report abuse |
  6. Prometheus

    What is important for us ALL to remember as Americans, is that this time in history is no different that any other time in the history of our Nation. The ONLY difference between the administrations of the Presidency of WW-I, or WW-II, or Korea, is the amount of INFORMATION available to the American citizen about things. WHERE did we begin to erode as a Nation...our Country's ability to win wars? It was during the war of Korea.

    What YOU need to realize is that you are NOT the government. Just because you think you KNOW something, it doesn't make you an instant expert on what should be done. Your response to that information you see can HARM. It can get people killed, it can cause untold suffering if an appropriate government response is delayed due to "Public Consensus".

    I will be the first to say that our government is not perfect. BUT...I will also say that we, as Americans, are our OWN...and WORST...enemy.

    January 19, 2011 at 10:36 am | Report abuse |
  7. conoclast

    You're certainly right about the 'amount of information available...'. I don't think the world has yet fully grasped the enormity of the computer revolution; it has quite literally revolutionized our lives and yet we're so blase about it! That we're able to comment immediately on world events - as on this very blog - can aptly be called "internet democracy".

    January 19, 2011 at 11:00 am | Report abuse |
  8. Jim Brieske

    Christina Larson is most likely a liberal analyst for the liberal New American Foundation. She should not be writing for public consumption. She wrote:
    "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."

    The notion that China blah blah blah. It's not a notion, they do. Beijing does not address the issue. They politely tell Geitner and President Obama to go fuk themselves.
    Obama will, no doubt, push Hu to do more on that front. What kind of a sentence is that? Why not just write the truth? Obama better not his hold his breath.
    Liberal writers are nothing but propagandists. That's why there is failure and will be increasing failure in this country. We must have a courageous republican president to counter with strength the cowardly dillusional writing of liberals within the media or we are doomed.
    jim

    January 19, 2011 at 11:29 am | Report abuse |
    • Jim Brieske

      correction: Obama better not hold his breath.
      jim

      January 19, 2011 at 11:31 am | Report abuse |
  9. ObamaBush

    I'd love to see China call in its debt and the resulting collapse of their economy. If anything, its the US Treasury that owns China as they "loan" us money out of necessity as they have no choice in the matter.

    January 19, 2011 at 11:51 am | Report abuse |
  10. miguel

    ride is over boyz and girls...move over, the Chinese are coming.

    January 19, 2011 at 12:11 pm | Report abuse |
  11. PapaSmurf

    Man, the US superpower is only a superpower in one category now and that is the military and that is slowly declining as China starts to flex its muscles. Soon, there will be commercials in China asking Chinese couples to donate money to those who are in need in third world countries. They will show pictures of children, dirty and hungry, with a mud house in the background and the words will read that they don't have access to food, shelter, or clothing. Then they will show a picture of the Statue of Liberty in the background and then pictures of Chinese celebrities towing around 10-20 american children they have adopted.

    January 19, 2011 at 2:03 pm | Report abuse |
  12. suzan

    aloha- to me as an american i hate when illegal immergrants come here in our country and expect us american to pay fo their scholling where these illegal immergants students nd their parents do not relize this entrie country is falling apart and we american are losing our homes and our jobs and our schools and bad economy that our governement is just lettimg illegal immergrants have their way here in america and using our tax dollor money too. this is a waste of time. and we americans and our governement and ins need to stop letting illegal immergrants have their way here in our country.

    January 19, 2011 at 2:10 pm | Report abuse |
  13. Ade

    well there's one thing here it's def not the american people that own america anymore

    January 19, 2011 at 2:40 pm | Report abuse |
  14. Pat

    You assume people are talking only about debt. How many of our jobs have disappeared to China? How many goods can you find in your local super discount store that are made in China, not the US? How many people do you know whose lives are constantly squeezed because jobs are allowed to be shipped to cheap labor markets? They own more of the US than me or any of my relatives, or anyone else I know, and we're citizens of this country. The elites of this country buy and sell us day after day, and do not care how it ruins us. Whether China or the elites in our own country hold all the pie, it really makes no difference. It's increasingly difficult to get a slice, and they don't give a flying crap if you have to live in the street over it.

    January 19, 2011 at 2:58 pm | Report abuse |
  15. RickyL

    So, the real question is.....whom do we owe?

    The same ones who just got a huge tax break that they didn't need?

    January 19, 2011 at 3:06 pm | Report abuse |
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