Why is China the one buying most of US bonds?

Question

Where did China get so much money? Does it really have that much more production going on than anywhere else in the world?
How do they keep their prices so low?
Why doesnt the US have any money to buy bonds? Does the US every buy other foreign bonds?

Answer 1

Where have you been? Gone into a store recently? Check the origin of what you purchase. Assure you that all major stores are stocked with over 50% foreign imported goods. That is where they get our money. Have you not seen the cargo containers on the railroads going across the country--- west to east. Inside those containers is what you will be purchasing when you go into the store.
Be thankful the Chinese and the Japanese have not redeemed their bonds yet. They are basically financing the USA with their bond purchases.
How do they keep their prices so low? Their standard of living still does not approach yours--you will work for $1.50/hr? You want meat every day, toilet paper, warm and cool homes, an automobile, new clothes occasionally, go out to movies or eat out once in awhile; that's not the standard of most Asiatics.
USA buy another country bonds? We do not have enough cash to finance our own country.If those bonds get called this country of credit cards will collapse shortly thereafter. We then will be working for$1.50 /hr if we can get it. Not all wars are won with a gun.

Answer 2

The US has a huge trade deficit - meaning that we import far more than we export. This is a really bad thing economically. The best is to have a trade surplus (like China - great economy on an international level), followed by a trade balance (like Europe as a whole - very sustainable and stable, look at the international popularity of the Euro for proof), but a trade deficit is never a good thing.

China's economy is one where they make everything they need themselves and export stuff to the rest of the world (basically). The local standard of living is low for the average person, but the national wealth by comparison between nations is huge. China does not have a trade deficit - they have the surplus.

No country should want to import more than they export. Cars, steel and now technology - why are those industries either dead, fatally wounded or really sick? Because we import the goods and services because they are 'cheaper'. Are they really cheaper? What happens when the trade deficit is unsustainable anymore and no nation will sell the US goods? What happens then? This is why you don't want a trade deficit.

It should be obvious that this mean more and more debt to other nations. Yet, those same nations that sell us goods such as Japan, Germany, China and such all rely on the US ability to continue to buy from them. You can live in your means or you can keep getting another credit card so to speak. Sooner or later the bill comes due though.

Basically, its like taking a loan from the grocery store to buy the groceries. On the surface it makes no sense, but when the grocery store can't function without moving product, they would rather give the food away on the promise the money will be paid than simply let it rot.

China is buying the US debt (ie - offering us another credit card) so the US can continue to be consumers of Chinese goods (can continue to use that card to buy stuff). They do this because they are our biggest supplier and we are their biggest customer.

For this to happen, the dollar has to be stable. If the dollar isn't stable, we can't afford Chinese goods so China buys US debt to keep the dollar stable. Buying US debt has the effect of keeping the dollar internationally stable - a good thing for China in the short run - more stuff sold, and in the long run - if we stop buying, China can call the debt.

However, as another poster mentioned, China is artificially deflating the value of its currency relative to the Yen, Dollar and Euro. I can't speak for why the Chinese do this, but it does have the effect of saying "no, no, we're still poor" when they drive up in a Lexus. Easy claim to make when you can see rural Chinese people living as squatters by what an American would term it. However, those 'squatters' are far better off than they were so for them its an improvement - one that can't be sustained if China's currency is values fairly in the international market.

Think about it - any nation would do the same thing if they were in the same position. We think of it as unfair because we are the ones that loose out because of it - American like to define 'fair' to mean 'whatever rules mean we win' then wonder why the rest of the world has issues.

Complicated, but China basically has the US in a bad spot - its basically a question of are we going to be put in a cauldron of boiling water or are we going to be put in a pot of what starts as room temperature water that is raised until it boils. Its going to boil eventually - its just a matter of how long it will take.

Just like a frog put in slowly heated water, Americans just sit there and die. We would certainly try and jump out if the water is already hot, but we don't notice the temperature rising - all we care about is making sure the cauldron has nice rims and a name brand attached.

Answer 3

Follow the money: China artificially drops its currency value so other nations will be attracted to investing in China. Since their currency is effectively worthless elsewhere, this produces an influx of 'hard' currency which they can then use to buy technology and durable goods from other countries, as well as hoarding gold. They also are able to buy bonds - effectively controlling some of the debt of other nations and ensuring a future supply of capital.

Once other nations have invested enough - in other words, building and paying for China's industrial infrastructure - China will simply seize and nationalize all those industries for its own use. It can then call in the bonds, forcing other nations to either a) pay for China's war against them, or b) default and collapse their own economies. Either way, China wins.

Hints:
space exploration -> missile technology
automotive production -> tanks
dominance in shipping -> military sea lift capacity

Remember that next time you buy something made in China.

Answer 4

China has a fixed exchange rate. In order to keep the price of there currency the same in dollars the must buy dollars when the their currency increases in value. This increase the supply of Chinese money, bring the price down and maintaining the exchange rate.

When the do this they print up new money and exchange it for dollars. Rather than locking the dollars away in a vault somewhere they buy bonds.

Answer 5

the main severe ingredient is to get the economic device growing to be lower back. confident the debt, credit status, commerce imbalance are all part of the priority, yet focusing too quickly on anybody of them might desire to no longer help. If the fee for halting the deficit is to decrease spending plenty that it floods the activity marketplace with laid of government workers, and stalls this gentle restoration, then is it somewhat worth it? i do no longer think of so. we would desire to look on the vast photograph and do what it takes to stay the two fiscally to blame together as additionally encouraging strengthen, particularly activity strengthen. we've purely been in the time of the worst recession by using fact the Thirties. that is not a concern which would be solved over nighttime. the reality that a million/2 persons are not status in bread strains is something, a minimum of. And to those that blame Obama, undergo in recommendations that the economic device virtually imploded earlier he replaced into elected. regardless of if he replaced into an financial genius and had the political climate to do regardless of he had to, we nevertheless weren't going to get out of this without some economic discomfort.

Answer 6

where did china get so much money? funny you should ask. they get so much money from the U.S.
yes their production goes everywhere in the world that has labor that is more expensive.
they keep their prices low because the Government there Pays for alot of things and the citizens there do not need to pay for as much stuff as people in the U.S. do for food, health care, water, labor, etc.

Answer 7

SO THEY CAN OWN THE COUNTRY WHY NOT USE THE BACK DOOR

Answer 8

tiss all about control