China’s US Portfolio: a CRS Report

Here’s one of those elusive reports from the Congressional Research Service, normally only available to the Congress.  This one tabulates how much the US owed in China in Feb., 2009: $1,200,000,000,000 [this is not a misprint].  Since this was five times the 2003 figure, it might be just a bit more than that now, probably a cool trillion and a half dollars.  The CRS report estimates that, counting China’s holdings of dollars themselves, the total was at least $1.5 trillion by June, 2009.  But, hey, that’s only about $5000 for every man, woman, and child in the US.

The authors, Wayne Morrison and Marc Labonte, also analyze the risks to the US in owing so much money to the People’s Republic of China, which is not exactly a friend of ours.  If they suddenly sold US bonds, it would cause their value, and the dollar, to plummet.  This would reduce the value of the remaining ones held by China, but it would have a catastrophic effect on the US economy.  It is already clear that a threat to do so gives China powerful leverage over US policies–just watch how US leaders behave in Beijing.  Have a nice day, and Merry Christmas; you’re free to celebrate it any way you wish in the West.

http://www.fas.org/sgp/crs/row/RL34314.pdf

R. D. Shelton

3 thoughts on “China’s US Portfolio: a CRS Report

  1. MIKE DEHAEMER

    Not a real surprise…but disturbing nevertheless.
    MERRY CHRISTMAS AND HAPPY NEW YEAR TO SCIENCE US

  2. Ahmed G.

    If China decided to pull the plug on U.S. lending not only would it be catastrophic to the US economy, but it would also lead to a major change in China’s foreign policy. Currently China has a major hold over the US, went it comes to negotiation. Right now the US has no say on what happens in China. China clearly showed this when Obama’s televised town hall meeting was canceled. If China started selling the U.S. debt, this would lead to a drop in its value, which would lead to major Chinese losses. China’s foreign reserves are expected to increase by $177 billion this year, but this is very small in comparison to the estimated $415 billion last year. Overall this is a very difficult situation for the US, but with careful foreign policy, this could be good for both nations in the long run.

Comments are closed.