Business
United States now owes China $980.8bn, but Asian country can’t demand for it
The United States debt owed to China is just below $1 trillion, as the US government’s decision to raise interest rates has caused Treasury to lose value in the securities market.
US debt owed to China had been above $1 trillion in the last 12 years, but in May, the amount fell to $980.8 billion, declining by $23 billion against the month before, America’s Treasury Department revealed on Monday.
In a bid to keep prices of export products low, China has always invested heavily in U.S bonds, making the Asian country the highest creditor to America, however, the decline has now seen Japan leapfrog China, with $1.2 trillion credit in U.S economy.
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Recall that the U.S has been battling with historical inflation which is at 9.1%, the highest level in 41 years. This has forced the country to raise interest rates to its recent years’ highest level of 1.75% in June.
This has made borrowing costly, and made treasury bonds less attractive to borrowers. The raise affected China’s holdings in U.S debt. Although, the Asian country’s decision to diversify its debt portfolio had also impacted its credit holdings in U.S economy.
Note that if China decides to demand for all the debt, it could crash the American dollar, but it will also hurt China, as Yuan, the Chinese currency value will rise at par to the greenback, which will compel Americans to reduce their demand for export products, and rather go for domestic products, hence, dragging down China’s export level.
For China to remain a top exporter, the country needs to ensure the dollar remains more valuable than Yuan, to encourage importation of its products.
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