Why do we Americans owe China so much money? I admit I am ignorant of these facts.
2007-07-13 13:24:05 · 10 answers · asked by satch 1 in Politics & Government ➔ Government
Because the US spends far more each year than it takes in. That is called the deficit.
Every year that we have a deficit, we need to borrow money to make up the difference. That is called the debt.
Much of that loaned money comes from China, or the debt was assigned to China by whoever the US borrowed from.
Since we're living on borrowed money, we have to owe someone. China is one of those someones.
2007-07-13 13:44:10 · answer #1 · answered by coragryph 7 · 5⤊ 2⤋
We have a trade deficit with China - as we do with many countries - and, China has a determined policy of keeping the value of thier currency, the Yuan, low relative to the dollar.
Thus, the Chinese have a lot of dollars, and, the Chinese government has to buy up those dollars (using Yaun), to keep them 'expensive' relative to the Yuan.
So, they've got all these dollars. What can you do with dollars that won't affect the price of the Yuan? If you spend them in China, the Yuan will go up. You could go buy stuff outside China, but that defeats the purpose of having a trade deficit. So, what they do is buy dollar-denominated bonds and hold those. That give's you some interest, and it puts the dollars back in America, where they don't hurt the value of the Yuan.
That's actually a little simplistic and very badly put, but that's what it comes down to. The Chinese government holds dollar-denominated securities as part of a policy of keeping the Yuan 'weak' so that thier exports remain cheap, which helps keep thier domestic industries growing.
2007-07-13 13:32:58 · answer #2 · answered by B.Kevorkian 7 · 3⤊ 0⤋
American deficit spending is financed by selling debt (e.g. bonds). Foreign countries like American debt because the U.S. is less likely to default on its obligations than, say, Chile. If China is the biggest creditor, it's because China has been the country that bought the most American debt. Cheer up. It's a vote of confidence from the world's most populous country.
2007-07-13 13:31:42 · answer #3 · answered by Anonymous · 3⤊ 0⤋
China owns over $400,000 billion of US Treasury security or government debt Pray China does not decide to collect some day.
In the rest of the world, we wonder if the American people know what their government has been doing for years.
2007-07-13 13:50:19 · answer #4 · answered by Letizia 6 · 3⤊ 1⤋
Part of the liberal slant on things is the deficit. Its has to do with trade, import and export. We buy more stuff from China than they buy from us so, yes, we owe them money. There are many countries that the trade deficit is big because, like Japan, they export lots of goods, but don't buy that much from America.
2007-07-13 13:37:09 · answer #5 · answered by George C 4 · 1⤊ 2⤋
They are one of the biggest purchasers of US Treasury bonds, tho they are holding less then they used to, along with other countries who buy... A possible indicator that foreign nations no longer consider us as good a risk.
http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=3900910
2007-07-13 14:56:39 · answer #6 · answered by Anonymous · 2⤊ 0⤋
Basically, when the US government wants to borrow money, it sells bonds. These bonds are sold on the open market, and anyone can buy them. If Chinese people want to buy them, then they are financing our government's debt and we owe them money.
2007-07-13 13:34:53 · answer #7 · answered by Anonymous · 4⤊ 1⤋
Because they buy our bonds. More americans should buy bonds to offset it.
2007-07-13 13:33:23 · answer #8 · answered by Anonymous · 6⤊ 1⤋
Jesus Christ! How much?
2007-07-13 13:41:47 · answer #9 · answered by Joeyboy 5 · 1⤊ 0⤋
we owe china money????????/
2007-07-13 13:32:05 · answer #10 · answered by Anonymous · 1⤊ 7⤋