China’s Treasury Holdings Make U.S. Woes Its Own
Wu Hong/European Pressphoto Agency
A container crane in eastern China. Buying Treasuries has bolstered China’s export economy.
By DAVID BARBOZA
Published: July 18, 2011
SHANGHAI — However grim Washington’s debt and deficit negotiations may seem to Americans, the impasse is nearly as disturbing for China.
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America’s Foreign Creditors
As the United States’ biggest foreign creditor — holding an estimated $1.5 trillion in American government debt — China has been a vocal critic of what it considers Washington’s politicized profligacy.
“We hope that the U.S. government adopts responsible policies and measures to guarantee the interests of investors,” Hong Lei, a foreign ministry spokesman, said at a news conference late last we
via China, Largest Holder of U.S. Debt, Remains Tied to Treasuries – NYTimes.com.
This article by the NY Times is the epitome of the current wisdom. If there was every a black swan, it’s this one. The basis of all economic laws is that people will act in a rational manner to improve their situation or at least not damage it. That’s basically the gist of this article. But the Chinese have a very long-term horizon and besides, they’re not capitalists, they’re communists. I can easily foresee a time when the U.S. and China clash and they DO use the Treasury Debt bomb on us. The Chinese can afford to sacrifice short-term profit for long-term gain. Don’t count on them acting in our best interests as if they were their own.