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. Julie

    I can't believe cnn is waving chinas flag over in front of our AMERICAN FLAG in the picture

    January 19, 2011 at 7:16 pm | Report abuse |
  2. moloa

    Don't try to use weasel words, of course china owns us..no doubt at all..

    January 19, 2011 at 7:35 pm | Report abuse |
  3. styymy

    Boehner should have showed up! What Boehner does not understand is that China IS financing the spending that this country needs in moving forward to recovery. Our buying of everything "Made in China" capitalistic ahem...arrangement has made this possible. In other words, don't bite the hand that feds you....China is feeding us whether you like it or not. Boehner should pull up a chair before they send him to bed without dinner.

    January 19, 2011 at 7:42 pm | Report abuse |
  4. just wondering

    are there any women that have jobs higher than factory worker, teacher, nurse?

    January 19, 2011 at 7:48 pm | Report abuse |
  5. join the club

    well...whatever...welcome to the (often dysfunctional) family!

    January 19, 2011 at 7:50 pm | Report abuse |
  6. Jorge Curi

    It is time for Americans to wake up and see the real America. For many years your coutry has played the world's sherif but from now on I believe there will be more and more the tendency of countries forming blocks and Ameica has to think things over otherwise it will end up in no block what so ever.

    January 19, 2011 at 7:52 pm | Report abuse |
  7. anonymouse

    China owns the USA! Well I suppose its better than China deciding that it doesn't want to anymore. That would cause a collapse of the US dollar and the free ride that Americans have enjoyed since the late 1940s when it became the worlds reserve currency would quickly come to an end due to currency devaluation. With the projected $150-200 a barrel oil later this year and loss of the USD reserve status then $10-12 a gallon for petrol would be on the cards. This would quickly spiral into hyperinflation and mass unemployment of 30+%. More profit for JP Morgan though with 2-3 times the number of folks signing on food stamps.

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

    Take my word, in 50 years we will sell them Alaska.

    January 19, 2011 at 8:31 pm | Report abuse |
  9. AdamM

    What's also not mentioned is China's economy relies on the US buying it's goods. So if they ruin us financially and we just stop buying their stuff than they are screwed as well.

    January 19, 2011 at 8:44 pm | Report abuse |
    • dave

      that is now true any more. now only about 30% of China exporting is with USA together. I don't have the importing data, any has it?

      January 19, 2011 at 9:07 pm | Report abuse |
  10. dave

    China doesn't own USA, we got their balls. Such as Taiwan independents, political dissidents, overseas Tibetans, Xingjiang rebels, and the Chinese neighbor countries who have territory disbutes with China. Every time we squeeze these balls, China will have to buy some our notes. We are true super power!

    January 19, 2011 at 8:59 pm | Report abuse |
  11. carl

    if China were to suddenly call in its notes, it would cause chaos to the U.S. economy.

    Does no one get this? And they are not the only one that can "call in notes". We are going down hill so fast I don't know if we can stop before we crash! We have got to get this country back up and running...For god's sake we gotta pay this debt off now! And not just from China, We gotta to pay it all off!

    January 20, 2011 at 2:47 am | Report abuse |
  12. West man

    China does not need a customer that can no longer pay it's bills and will soon find new customers and the yhan will replace the fiat $USD as the worlds reserve currency because China now owns the largest banks in the world or did the TV news not tell you.

    Our politicians have commited treason and have been bribed by the bankers of the world and we are now going to pay the price for sitting back and allowing this to happen.

    China is not dropping bombs on everyones heads like uncle sam just so the likes of Haliburton and Shell Oil can reap the rewards paid for by american blood, money, taxes and freedom.

    Keep watching, pull up a chair but don't be suprissed when the light go out and these politicians and bankster have all flead with the gold/silver and left you to pay the debt

    January 20, 2011 at 6:46 am | Report abuse |
  13. Lauren

    I was just writing about this same issue, from the Chinese perspective that I hear locally: http://www.abandonthecube.com/blog/poor-journalism-american-debt-will-china-call-in-debt-early/ I think its important to keep in mind that the Chinese still view the US as a safe investment bet, well said.

    January 27, 2011 at 12:42 am | Report abuse |
  14. Mari

    I think that china will someday rule the world. Despite our growing debt, i really hope Obama doesn't call a spending freeze. That would be hell for our country. We should just start borrowing money from different places more. I mean, China's not the only country that owns a part of the US.

    February 1, 2011 at 2:16 pm | Report abuse |
  15. Mari

    I'm actually writing an article about our national debt for my school's newspaper. Just thought i'd throw that out there.

    February 1, 2011 at 2:17 pm | Report abuse |
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