How much money does the us owe china

Very little came at market terms and with strings attached such as collateral. Assessing repayment burdens and financial risks requires detailed knowledge on all outstanding debt instruments. Second, the private sector will misprice debt contracts, such as sovereign bonds, if it fails to grasp the true scope of debts that a government owes. This problem is aggravated by the fact that many Chinese official loans have collateral clauses, so that China may be treated preferentially in case of repayment problems.

As a result, private investors and other competing creditors may underestimate the risk of default on their claims. And, third, forecasters of global economic activity who are unaware of surges and stops of Chinese lending miss an important swing factor influencing aggregate global demand.

One could look to the lending surge of the s, when resource-rich, low-income countries received large amounts of syndicated bank loans from the U. That lending cycle ended badly once commodity prices and economic growth slumped, and dozens of developing countries went into default during the bust that followed. Central bank swap lines can be understood as standing lines of credit, where central banks agree on exchanging their currencies to facilitate trade settlements and to address liquidity needs.

As of , the PBoC has signed swap agreements with more than 40 central banks ranging from Argentina to Ukraine , providing the right to exchange more than U. As a result, nations facing financial strains can turn to China before the international financial institutions, including the IMF.

Why does this matter? IMF lending is transparent, and it is usually conditioned on a plan to improve national policies. This is not necessarily the case for Chinese lending, which gives rise to important questions of creditor seniority. For example, if a nation indebted to China turns to the IMF, officials should be aware that any funds the IMF disburses may be used to pay another official creditor, China, rather than be used to blunt market strains.

Since , two dozen developing countries have restructured their debt to China. This recent increase in the incidence of sovereign debt restructurings of Chinese debt may have a benign interpretation, but given the slower growth and lower commodity prices of recent years, it may well be a sign of brewing liquidity and solvency problems in numerous developing countries.

So it can use its reserve of US dollars to buy Treasurys. China can also use its foreign exchange reserves to influence the value of its currency. Yes, that is a lot—the most in the world , in nominal terms.

Most of it is owned by domestic actors, either consumers, banks, or institutions like the Federal Reserve. First, it could sell its Treasurys.

China could also let its US Treasurys mature and not renew them. But the US constantly issues new bonds before the old ones mature to refinance its debt. China could sell a lot of its Treasurys suddenly and without warning, and it would take time for the Federal Reserve or foreign investors to step in.

This would destabilize the markets but also hurt China, which is a major global exporter. Full stop. This is the highest level of debt owned by Japan in several years, beating out China as the largest holder of U.

The increase in Japan's holdings is its largest since The low and negative yield market in Japan makes holding U. China gets a lot of attention for holding a big chunk of the U. China takes the second spot among foreign holders of U. It currently holds The United Kingdom has increased its holdings in U. It would appear odd that Ireland is the fourth-largest holder of U. However, a big factor in Ireland's place is the fact that many U. Dublin is a focal point for international fund management but also represents the European branches of U.

However, there has been a drop in Ireland's U. Luxembourg is the fifth-largest holder of U. Treasuries, equal to about 3. Government Accountability Office. Department of Treasury. Treasury Bonds. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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