The Islamic Post Blog

America Reaches Its Credit Limit with China by Khalida
December 7, 2012, 11:59 pm
Filed under: 2009 June Vol. 1, World

June Vol. 1 2009

(IP) –New data from the US Treasury Department shows that Chinese investors cut back on their purchases of bonds during the months of January and February. Representative Mark Kirk was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was distressed to find out how much debt was being bought by the US Federal Reserve, a private, non-governmental institution. This buying was due to absence of foreign investors.
China holds more US Treasury bonds than any other country, around $800 billion dollars. “It would appear, quietly and with deference and politeness, that China has canceled America’s credit card,” Kirk said to the Committee of 100, a Chinese-American group. The Chinese economy has also been affected by the worldwide financial disaster and Premier Wen Jiabao has openly expressed concern about the condition of his country’s US investments.
Last year, China lent America $400 billion—a sum equivalent to more than 10 percent of China’s gross domestic product. Zhou Xiaochuan, Governor of the People’s Bank of China, wants to lead China away from buying more American debt. Brad Setser of the Council on Foreign Relations wrote in a recent report: “Day after day, China is the single biggest buyer of treasury bonds in the market,” he also added that, “Never before has the U.S. relied so heavily on another country’s government for financing.”
In reality China cannot completely ignore the US currency without affecting its own US holdings, but as America continues to incur even more debt. China is encouraged to quicken its pace towards investing its money elsewhere.


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