Reality check: There has been a lot of talk about how much U.S. debt China has and that China will soon be "calling the tune" and making America bend to its will. We certainly think the current account deficit is a problem and that China is going to be a tough economic competitor, but all the shouting about how menacing China's $200 billion in U.S. paper is, is somewhat overdone. Consider the following
report:
Foreigners held $1.96 trillion of the $4.43 trillion in U.S. debt that was publicly traded. Here are the countries with the largest holdings, according to a monthly [March] report from the Treasury Department: | | billions |
| Japan | $701.6 |
| Mainland China | $194.5 |
| United Kingdom | $163.0 |
| Caribbean banking centers including the Bahamas and Bermuda | $92.5 |
| South Korea | $67.7 |
| Organization of Petroleum Exporting Countries | $64.7 |
| Taiwan | $59.2 |
| Germany | $57.1 |
| Hong Kong | $52.9 |
| Switzerland | $50.0 |
| Canada | $43.4 |
| Mexico | $41.1 |
| Luxembourg | $29.3 |
| Singapore | $27.6 |
| Ireland | $21.0 |
Japan is still the country to watch closely.
posted by Quiddity at 3/20/2005 03:31:00 AM
The other concern, based only on my anonymous sources, is that China holds a larger percentage in short term notes. Much of Japan's holdings accrued while the US still sold 30yr treasuries, while China holds predominantly 5yr treasuries. This is an issue because it means that the US will be forced to reissue (or rollover) the debt much more quickly with China.
If interest rates rise... and we can't get our budget ballanced... and no one else wants to lend us the money at the same low rate... we end up paying (a lot) more interest. Alternately, we could just default on SS and other bonds at the same time :^) just to be fair. We would still have to ballence the budget, but that's a job for Democrats.
