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. Kenny

    So I can assume that we are not as far up the creek as previously thought? That's a feeling that warms me. We will never reaquire the jobs lost to China but what we need to do is to anchor the new jobs created here in such a manner that they cannot be packed up and shipped off to places like China or India. To accomplish this, our kids need to be highly educated in math and science so they can become more than competative with kids from developing countries like India and China.

    January 19, 2011 at 5:30 pm | Report abuse |
  2. Prophet

    get your money out of the banks and out of the hands of the US Gov. now, buy as much gold as you can afford, grab your guns and run to the hills. Keep one eye in the sky, NWO is at hand.

    January 19, 2011 at 5:35 pm | Report abuse |
  3. tilmeismoney

    Obuma should take Hu to Fort Knox and show him where his mone is.

    January 19, 2011 at 5:41 pm | Report abuse |
  4. Sandra B

    thanks cnn. that helped.

    January 19, 2011 at 5:45 pm | Report abuse |
  5. Sandra B

    Another issue is that more materials are going to china and we can't get them here. crosses several industries (metals, seeds, etc.)

    January 19, 2011 at 5:47 pm | Report abuse |
    • Sandra B

      hard for a metal roofing company to do much business if they can't get metal. or farmers to plant a small wheat field if they can't get wheat seeds (sent to one of the war countries so they won't grow drugs? not sure what happened there.) but, i know people that want to do something in their small business, but can't get what they need to do it. that's real.

      January 19, 2011 at 5:50 pm | Report abuse |
  6. A CNN Reader

    The Chinese dont own the US??? BULLCHIT... Anyone with a brain knows that more of the USA is owned by foreign countries than what is owned by the US.... What kind of crap is this????

    January 19, 2011 at 5:48 pm | Report abuse |
  7. April

    Hu, I can say the same thing about the US.
    "They have an oversupply of people at this moment who've graduated from colleges and aren’t able to find high skilled jobs"

    January 19, 2011 at 6:07 pm | Report abuse |
  8. Cyg

    So the article would have you believe the selling of Toll Highways, Oil and Gas Well rights, Buildings and Real Estate, on a permanent forever owned basis – not to mention our Treasury Bills – didn't happen – and everything is A-OK? Cool, glad I was worried for nothing (never mind the Chinese I see working the wells we don't get to touch in USA property)

    January 19, 2011 at 6:10 pm | Report abuse |
  9. JakeOL

    "75% of Uncle Sam’s growing debt is in the hands of U.S. interests" last time I checked most US debt are owned by Europeans, but they look like us and speak like us so it's all good. And the 75% who own Americas debt are owned by the top 6% of know the folks we bailed out and cut taxes on. Awesome! Bringing back free-market "monarchy" one tax cut for the rich at a time.

    January 19, 2011 at 6:27 pm | Report abuse |
  10. RabbiDavid

    If you really think the Chinese do not own the USA then you are drinking the Kool Aid from the "Regime". Reality is learn Chinese NOW or be odd person out when the music of America stops.No empire lasts forever and no amount of religous,gun loving,god fearing Americans can stop the march of time.ALL of you knew this was coming for 20 years and now that the people who pull your strings tell it to your face (media & government)-you seem genuinely surprised.You think gold & silver are where they are because they make good paperweights? Enjoy your twilight Americans, soon its rice bowls for all! Like it or NOT!

    January 19, 2011 at 6:32 pm | Report abuse |
  11. the_dude

    I wonder if the oriental president looks down on obama for being a black man. Maybe he treata obama like a dummy because we all know orientals hate blacks and visa versa.

    January 19, 2011 at 6:40 pm | Report abuse |
  12. Fred

    CNN is really towing the company line here! China helps schools. China doesn't own the US. China is super awesome. Methinks thou doth protest too much!

    January 19, 2011 at 6:41 pm | Report abuse |
  13. all your bases are belong to us

    China most certainly does "own" us. Just try to buy anything from any major retailer that is NOT made in China.

    January 19, 2011 at 6:46 pm | Report abuse |
  14. big lipped jolie

    if only chinese woman were attractive.

    January 19, 2011 at 6:55 pm | Report abuse |
  15. GoRemote

    Exactly how do you "call" a Treasury Bond?........I'm pretty sure you can't.

    January 19, 2011 at 7:13 pm | Report abuse |
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