The Chinese sell a lot of merchandise in the United States and, in the process, accumulate a lot of dollars. They then loan many of those dollars back to the United States in exchange for all manner of American i.o.u.'s, including Treasury bonds, federal agency bonds, and private-sector debt.America's indebtedness to China, as a result, is staggeringly high, although the Bush administration - which needs foreign loans to help finance the budget deficit - seems unfazed. But there is reason for pause. The Wall Street Journal reported this week that China's holdings of foreign currency and securities would soon top $1 trillion, a fivefold increase since 2000. Roughly 70 percent of that is believed to be in dollars or dollar-based assets.For several years, China's loans have helped to keep prices and interest rates low in the United States, and to finance big tax cuts. so why dont they pay there debt so the world's largest army can finally modernize
2007-12-24
16:39:11
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Social Science
➔ Economics