China Holds $1.1 Trillion of US Debt (video)


The downgrading of the US’s S & P credit rating from AAA to AA+ shined the limelight on something that has been known but perhaps not sufficiently acknowledged — China’s vast foreign holdings. China has $3.2 trillions-worth of foreign reserves, $1.1 trilion in US Treasuries, notes the Guardian. While Chinese government agencies and China’s central bank have so far been mum about the downgrade, People’s Daily, the official Communist party newspaper, issued a scold to the US to “cure its addiction to debts” over the weekend. State-owned newspapers have continued to blast the US, not to mention Europe, for not “living within their means.”

Over the weekend, other Chinese  websites including Sina Weibo (aka China’s version of Twitter, which is banned by Beijing) hosted fervent discussions about the S & P downgrade, though not so much to censor the West as to ask why the Chinese government has invested almost half of the country’s foreign reserves in US Treasury securities:

“The United States’ sovereign credit rating suffered a downgrade, why did we become the biggest victim?” one microblogger wrote on Sina Weibo, one of the more popular sites, which had hundreds of such postings. “China is always bowing to the United States, when will China really rise up and cast aside its constant fear of the United States’ reactions!”

“On the question of U.S. debt, China’s strategic decision makers are pigs, they would rather let the people’s money be used by others than let the money be used by their own people,” said one posting over the weekend. The comment soon disappeared, presumably removed by censors.

Noting that “much of the outcry seemed to be more about venting wounded pride than proposing monetary alternatives” — though the Saturday Xinhua editorial blasting the US did say that a new global reserve currency should be created — the New York Times points out that “few other options exist as long as China sees the need to buy tens of billions of dollars each month to keep its currency weak and protect the nation’s export machine.”

China’s economy had 9.5 growth in the second quarter. Last year, it racked up a $273 billion trade surplus with the US. But experts point out, even as China fears for losses in its foreign reserves, it is (not that it will admit it) partly to blame due to its failure so far to shift its economy towards domestic consumption, says the Guardian:

The economy remains investment- and export-driven, leaving it vulnerable to external shocks. But if one long-standing concern has been a double-dip recession, Beijing’s other great anxiety has been controlling politically risky inflation. While a massive stimulus package helped China ride out the storm last time – aiding the global recovery – concerns about rising prices will make officials wary of loosening monetary policy. Either way, they will worry about potential social unrest.

Prices for housing, consumer goods including food and services were up 6.4 percent in China last year.

As one blogger noted:

“Chinese people are working so hard, day in and day out, the economic environment is so good, but people’s livelihoods are not so great — turns out it is because the government is tightening people’s waist belts to lend money to the United States.”

If anyone needed an object less that we now live in a global economy, the events of the past summer have been providing a painful object lesson. The US finds itself saddled with a lowered S & P credit rating and a bad taste in its mouth (not to mention being on the receiving end of heavy criticism from China) after several weeks of deficit-reduction wrangling that turned into debt-ceiling debacle and sullied the US’s image around the world.

The European Union and the International Monetary Fund bailed out Greece in July, after Prime Minister George Papandreou’s government nearly collapsed over disagreements about a package of austerity measures. Financial leaders argued that Greece must be bailed out for fear of contagion, of the debt crisis spreading to other of Europe’s weaker economies. So far, that’s precisely what seems to be in danger of happening as Italy and Spain are now forced to pass austerity measures. A key difference is that both of these countries had already taken measures to reduce their deficits yet still seem in danger of needing the EU and the IMF to step in, as the New York Times points out.

Gloomy news. So, just to make sure you’ve got a good grasp of what’s going on, and because we could all probably use a laugh, here’s a video (thanks, Cathryn!) that sums up the whole mess in 3 minutes, with a nod to the one country that seems to be backing everyone now, China.

(Note: The video was made in 2010 which is to say, the problems the world economy faces now are the same ones it was facing last year and said it was fixing.)

Related Care2 Coverage

Whose “Downgrade” Is It?

Markets React To A Flawed S&P

China Warns US to “Cure Its Addiction To Debts”

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Lloyd H5 years ago

You know this endless BS about the amount of US debt that China holds has become sickening to the point of intolerance. Fact under Donald Rumsfeld as Secretary of Defense admited that Pentagon had LOST $2.3 Trillion between Jan 2000 and Sept 2001 and they had absolutely no idea where it had gone, for those challenged by their Repug math the DOD lost more money in just over a year than the amount of US debt China owns.
Now as to the Debt ownership REALITY: US individuals and Institutions - 42.2%, Social Security Trust Fund - 17.9%, US Civil Service Retirement Fund, 2.1% - US Military Reitrement Fund that means 68.2% of the US Debt is owned by the US. China - 7.5%; Japan - 6.4%, Brazil- 1.3%, Oil Exporting Nations - 1.6%, all other foreing Nations - 11.6%. And you damn well need to remember that 42% of the Debt comes from 8 years of Bush. And less than 1/10 of the Debt comes from Obama.

Sonny Honrado
Sonny Honrado6 years ago


Glenn M.
Glenn Meyer6 years ago

Cutting spending on, so called, entitlements is ineffective for addressing the deficit. Cutting programs that support the low and middle class will further strain both who don’t even receive lower prices as a result of the U.S. job losses and create a disconnect that will end in another financial collapse. The justification for attacking government benefits as opposed to raising taxes is the creation of jobs. But where?

Corporations have over-powered our government which now believes that out-sourcing and off-shoring of U.S. jobs is inevitable and necessary with expectations that the middle class should fall on their swords. It is the underlying cause of the financial collapse and borders on national security with the loss of our middle class tax base. Yet, this nation does nothing, not even demand it be restricted by whatever method. International businesses are doing the UN-AMERICAN activity of destroying U.S. salaries, U.S. businesses that hire in the U.S., and as an end result, destroying the U.S. marketplace while still demanding BUSINESS ENTITLEMENTS and protections for themselves.

Infrastructure spending and tax breaks will not replace enough jobs to keep up with the hemorrhaging loss of U.S. jobs from out-sourcing over seas. Neither party will do anything about it unless we begin grass roots efforts to protest out-sourcing and off-shoring of U.S. jobs. If nothing is done we will deserve what we get and it will get a lot worse before it gets better

Barbara T.
Barbara Talbert6 years ago

Well, the US is not the cash cow that everybody thought it was and perception is having to face off with truth.

Yvonne C.
Von D6 years ago

Why don't we just trade debt for debt with China and get away from them. We can trade them debts we are holding on other countries for getting our note back from them. That way we don't owe them and they get paid from other countries instead. Hey banks do it all the time. Just move stuff on paper. We can extricate our selves from the financial fray and lock down imports from China without any guilt trip from them.

Marilyn L.
Marilyn L6 years ago

Are you boycotting China imports into the USA during the month of August, if not why not.

Ernie Miller
william Miller6 years ago


Katie K.
Katie K6 years ago

I think i'm turning Japanese..I think i'm turning Japanese..I really think so.
Ooops i mean Chinese. It'll be interesting to see how we get out of this mess. Do you think this was all a big plan to make us all slave laborers?

Fred Krohn
Fred Krohn6 years ago

As I will not acknowledge ANY 'debt' to the Communist mainland Maoist junta of China, I consider this irrelevant. Only Taiwan's government would be eligible to collect anything on it. Down with Communism!

Patricia J.
Patricia J6 years ago

China's rapidly growing monopoly of the international aconomy should be a cause for major
concern to America and innumerable other countries throughout the world.In continuing to support trade and boost the booming economy of China, these countries are sowing the seeds of their own destruction.The increasing economic dependency on this rapidly rising Super Power has contributed largely to the huge US debt feficit,growing unemployment and an alarmingly escalating global recession.Tthis ploy of economic manipulation has been far
more effective than any military might in leading to the downfall of countless empires
throughout the ages . But then, since when has mankind learnt any lessons from history?