China Losing Taste for U.S. Debt

Friday, January 9, 2009

Were it not for China there would be no Iraq war.

China has bought more than $1 trillion of American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers.

The declining Chinese appetite for United States debt, apparent in a series of hints from Chinese policy makers over the last two weeks, with official statistics due for release in the next few days, comes at an inconvenient time.

On Tuesday, President-elect Barack Obama predicted the possibility of trillion-dollar deficits “for years to come,” even after an $800 billion stimulus package. Normally, China would jump to purchase the debt required to pay for those deficits, mainly short-term Treasuries, which are government i.o.u.’s.

But now Beijing is seeking to pay for its own $600 billion stimulus as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.

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5 Responses to China Losing Taste for U.S. Debt

  1. I’m not worried, as I’ve been practicing my bartering skills.

  2. Mets Fan says:

    The US Treasury will be forced to print funny money.

    It’s used to play Monopoly and not worth the paper its printed on.

  3. VicoDANIEL says:

    The entire globe is in some degree of recession.

    This represents a huge obstacle to Barack Obama securing a funding source for his ambitious agenda to steer the country out of the financial morass we’re stuck in.

    My prediction? I think the day is coming when we will see U.S. international airports like JFK, LAX and SFO, sold to Dubai and Saudi Arabia. Our landmark bridges like the Golden Gate and the Brooklyn Bridge sold to Germany and Russia, and our national parks, like Yellowstone and Yosemite sold to China and Australia.

    We will own nothing.

  4. Harry says:

    I think I’ll move to New Zealand. I’m serious. We visited New Zealand in 2006 and love it. I don’t feel connected to the U.S. now.

  5. Rachel says:

    Vico Daniel – And state lotteries. I saw an article that said several states were considering selling off their lotteries to foreign buyers.

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