The U.S. national debt is at $20 trillion. A large chunk of that debt is owned by China in the form of U.S. Treasuries.
On today’s show, Glenn broke down the situation with this analogy: the U.S. is like a giant corporation and other countries buying U.S. Treasury bonds are like investors.
How exactly is China involved in all of this?
The largest foreign holder of U.S. Treasuries, China holds Treasuries totaling $1.2 trillion in value, keeping the East Asian nation’s currency weaker than the U.S. dollar and boosting its export industry.
On Wednesday, Bloomberg News reported that Chinese officials recommended slowing or even stopping the country’s purchases of U.S. Treasury bonds. The report worried investors because China’s large holdings of U.S. Treasuries could rock the market.
Did China stop buying U.S. Treasuries?
China has responded “fake news” to the Bloomberg report, saying that it’s just diversifying its foreign exchange holdings. The State Administration of Foreign Exchange said the country is not halting or ending purchases of U.S. Treasuries.
The Chinese economy is in trouble, and the U.S. may in turn be in trouble as its biggest investor struggles. Labor costs are rising, fewer people are buying Chinese exports and China has a large amount of debt.
“The last few years for them have been the worst in 30 years,” Glenn said. “Like the rest of the world, they never really recovered from 2008 and the financial crisis.”