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. Ted

    ....Everyone Knows is Reid is mentally disturbed to begin with....Now with a Big Mouth and statement like this...which far less words have started Major Wars...Only endangers America....as we owe them so much money....PLEASE Recall this idiot...Nevada..he and Obama..America's WANNABE...Dictator.. are DESTROYING your State...and now our Nation's destruction will be kicked into High Gear...I'm Surprised Hu didn't walk out on the meeting with Obama...He has Far more Dignity that Reid and Obama put together...

    January 19, 2011 at 3:16 pm | Report abuse |
  2. Kouli

    On the south side of Chicago, it is very well known what 'owns' means. When you owe the Chinese a trillion and a half dollars, and there is no end to it, they 'own' you–lock, stock, and barrel. That deficit is not going to go away, as long as Obama is in office. As a matter of fact, it is going to get worse. We have to re-examine our priorities and listen to the voice of the people. I was under the impression that when you elect an official, he is supposed to represent your views and fight for you. Unfortunately, that is not what is happening. They turn on you. You call that democracy? This sounds more like Lebanon, Chile, and Tunisia. Send Obama packing to Kenya, so we can see the light of day.

    January 19, 2011 at 3:38 pm | Report abuse |
  3. sssimon

    China and the US are in a symbiotic relationship, joined at the hip.

    What does it feel like all you teabaggers to have as your best friend in the world an authoritarian communist dictatorship???

    January 19, 2011 at 3:39 pm | Report abuse |
  4. outawork

    "No, China doesn't own U.S." – its just looking to rent.

    January 19, 2011 at 3:40 pm | Report abuse |
  5. JimmyKerr

    So Miss Larson's flawed argument is that $900 billion in debt to China is nothing in comparison to our overall debt, so we shouldn't worry about it unless we're a comedian or late night talk show host. That just doesn't make me feel better about it, Christine, sorry.

    January 19, 2011 at 3:45 pm | Report abuse |
  6. Sydney Australia

    Yes, China owns the US. Anyway you want to spin it, China owns the US.

    This must drive the Progressive Greenies who want to stop coal production and recycle everything crazy.

    January 19, 2011 at 3:47 pm | Report abuse |
  7. bramep

    Boy oh boy!!! some people are filled with lots of speculation and inuendo. They come here and other places and scream to the top of there lungs how China owns the US and how President Obama is selling us down the river. I will make only this observation, the president of the united states will have a trade deal that will be great for america. Great for jobs and great for the economy. I do not hear any of those loud mouths now.

    January 19, 2011 at 3:52 pm | Report abuse |
    • Prophet

      what fantasyland are you from?

      January 19, 2011 at 5:48 pm | Report abuse |
  8. Dale

    The Chinese president coming to the United States there has to be a big reason why.

    My head is going num trying to figure all of this out, this is the way I see it.

    United States and China have been trying to manipulate each other but in doing so, both countries economies are now depended on each other.

    If the United States quits buying cheap Chinese products because the United States goes broke this will cause the Chinese economy to collapse.

    And if that happens, with all of these U.S. companies with their investments and factories over in China will go under with the Chinese economy, causing all of these U.S. companies here in United States to go out of business, because China economy collapsed.

    My head has gone num correct me if I am wrong.

    January 19, 2011 at 3:57 pm | Report abuse |
    • :P

      yes you are wrong. you left the b off of numb. hehe

      January 19, 2011 at 5:13 pm | Report abuse |
  9. Dave254

    The only thing left for China to do is write America's eulogy.

    January 19, 2011 at 4:04 pm | Report abuse |
  10. realist

    Seems I heard recently that China was meerly reallocating its spending and putting less and less into the the US and more into hard assets that yield more substantial benefits i.e. oil & gas companies, medical equipment, South American investments etc. I don't really see that they 'need' anything from the US any longer except our willingness to subsidize goods and turn over technology production.

    January 19, 2011 at 4:05 pm | Report abuse |
  11. scotlanta

    there's a word for 90% of the comments here: xenophobia. if you don't know what it means (and i'll bet many of you don't) look it up.

    January 19, 2011 at 4:06 pm | Report abuse |
    • Prophet

      and because you used the word you looked makes you???

      January 19, 2011 at 5:37 pm | Report abuse |
  12. Trav202

    Prepare yourselves for a life of serfdom.

    January 19, 2011 at 4:29 pm | Report abuse |
  13. Justin

    I hate China because they're different than us, which makes them the 'enemy'. They don't do things the way we do; so clearly, they are wrong, evil, and not to be trusted.

    You are either with us or against us. There is no middle-ground, no shades of gray.

    January 19, 2011 at 4:36 pm | Report abuse |
  14. Jack

    'according to numbers'? I smell a red herring!

    January 19, 2011 at 4:41 pm | Report abuse |
  15. BSBS

    oh no, the old saying "better de ad than red" came to mind when the chinese governmnet threw me a skinny bone by buying 50tubine engines from General Electric.

    January 19, 2011 at 5:11 pm | Report abuse |
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