The Debt Level Held by China - Essay Example

The United States has had a long relationship of trade with China over decades. The United States debt level held by China is changing every month. This depends on the number of treasury notes sold or bought by the government of China. For example, the U. S government owes China about $ 1.164 trillion in debt. This is based on imports from China and other treasury notes (US Census Bureau).
What factors contributed to this increase in debt over the last ten years?
This debt level has resulted from an increasing import of services between July to August and a decrease in exports of goods during the same duration which has led to a decrease in industrial materials and supplies. The treasury notes have also grown the economy of China by keeping the currency weaker, hence the products from China become cheaper. Also, selling debts to China has allowed the economy of the U.S. to grow through funding the programs of the federal government. Other factors that have led to this increase in debt level include China’s strategy of keeping its yuan lower in value to ensure its export prices are competitive. In case the dollar falls in value, the government of China buys Treasuries thus increasing the dollar demand. This leads to more supply of dollars, hence increasing the debt.
Of what significance is this debt level, in terms of the creditworthiness of the United States? Read More