If China ever did call in its debt, it slowly would begin selling off its Treasury holdings. Even at a slow pace, dollar demand would drop. That would hurt China's competitiveness by raising the yuan's value relative to the dollar. At some price point, U.S. consumers would buy American products instead.
Holders of U.S. Debt
Were China to suddenly unload its reserve holdings, its currency's exchange rate would rise, making Chinese exports more expensive in foreign markets. As such, China's holdings of American debt do not provide China with undue economic influence over the United States.
Continuing a trend that began early in 2021, China's portfolio of U.S. government debt in May dropped to $980.8 billion, according to Treasury Department data released Monday. That's a decline of nearly $23 billion from April and down nearly $100 billion, or 9%, from the year-earlier month.
Tian said that in the short run, China may continue to buy US Treasury bonds, given there are few other better options for China to invest its vast foreign exchange reserve assets, but it should accelerate foreign exchange restructuring in the long run.
The share of U.S. government debt belonging to China has dropped below $1 trillion — the lowest level in 12 years. China has been a big buyer of U.S. debt.
Your life savings could be reduced to nothing almost overnight. Your taxes will skyrocket. Your life could be in danger. Your payments from the government will dramatically decrease or stop altogether.
China's debt is more than 250 percent of GDP, higher than the United States.
There are countries such as Jersey and Guernsey which have no national debt, so the pay no interest. All this started with the Napoleonic wars when the government borrowed money to fund the war.
Foreign governments who have purchased U.S. treasuries include China, Japan, Brazil, Ireland, the U.K. and others. China represents 29 percent of all treasuries issued to other countries, which corresponds to $1.18 trillion.
The public holds over $22 trillion of the national debt. 3 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.
Which Country Owes the Most Money to China? Venezuela is the country with the greatest sovereign debt exposure to China, in terms of direct lending (excluding portfolio holdings), according to AidData's 2021 study, totaling $74.7 billion.
Foreign holders of United States treasury debt
China held 980.8 billion U.S. dollars in U.S. securities.
If China (or any other nation having a trade surplus with the U.S.) stops buying U.S. Treasurys or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.
China buys Treasuries to help depress the value of its currency, the yuan. A cheaper yuan makes the country's exports less expensive for foreign buyers. The Chinese economy would suffer as much as, if not more than, that of the United States if China were to suddenly stop buying U.S. debt.
As of 2022, the Japanese public debt is estimated to be approximately US$12.20 trillion US Dollars (1.4 quadrillion yen), or 266% of GDP, and is the highest of any developed nation. 45% of this debt is held by the Bank of Japan.
Can the U.S. Pay Off its Debt? As budget deficits are one of the factors that contribute to the national debt, the U.S. can take measures to pay off its debt through budget surpluses. The last time that the U.S. held a budget surplus was in 2001.
Raising taxes and cutting spending are two of the most popular solutions for reducing debt, but politicians may be hesitant to do both. Diverting spending from the military to other sectors may boost job growth, which could spur consumer spending and help the economy.
Tax Cuts. Large tax cuts passed by Congress during the presidencies of George W. Bush and Donald Trump have played a large part in the subsequent deterioration of government finances and the resulting growth in the national debt.
As it tried to twist its way out, it announced last week that it would switch to servicing its $40 billion of outstanding sovereign debt in rubles, criticizing a “force-majeure” situation it said was artificially manufactured by the West.
The downturn in China's property market is unlikely to lead to a meltdown that triggers a financial crisis. China's property slump and suffering economy is leading some to wonder if China could be on the brink of its own Lehman-style crisis.
What is global debt? Global debt is borrowing by governments, businesses and people, and it's at dangerously high levels. In 2021, global debt reached a record $303 trillion, according to the Institute of International Finance, a global financial industry association.
The national debt recently passed $30 trillion. The publicly held debt (minus Social Security lending to the Treasury Department) is $23.5 trillion, a bit over 100 percent of GDP. Within a few years, the U.S. will bust the record of 106 percent set in 1946 as World War II ended.