The big news is that China is still willing to purchase U.S. government debt despite the possibilities of shifts in the value of those assets. This latest update was issued by Vice Governor of the People’s Bank of China, Hu Xiaolian, during a March 23 press conference.
The vice governor reportedly said that his country’s investment in U.S. Treasury bills was “an important component part of China’s foreign currency reserve investments.”
The vice governor also voiced concerns regarding the stability and profitability of the treasury bonds. The comments revolved around the debt being amassed to fund the stimulus package could lead to a weakened dollar and a rush of inflation.
With an estimated $1 trillion in U.S. debt, China is currently the United States’ largest foreign creditor. If there is a substantial drop in the value of the dollar, those tremendous assets could suffer similar reductions.
The vice governor’s comments come after those of Chinese Premier Wen Jiabao stated that he was “a little bit worried” about the condition of the U.S. federal debt being held by the Chinese government. The premier encouraged Washington to maintain its credit-worthy status and honor its commitments.
In fact, many of the concerns voiced by Chinese officials will be reiterated at the upcoming G20 Summit in London, organized to find solution to mounting global financial crisis. Certainly, Chinese President Hu Jintao and President Obama will have much to discuss on April 2.
According to some analysts, the Chinese government holds almost half of its estimated $2 trillion in foreign currency reserves in U.S. Treasury bonds and notes by other organizations affiliated with the U.S. government. Debate among high-level officials in the Chinese government continues to develop concerning whether the continued purchasing of treasury bonds is the right direction for China.
The bottom line is that the United States needs China to keep purchasing those Treasuries to provide funding for deficit spending. The goal is to avoid a long-term recession and maintain viable interest rates so financial institutions can afford to lend.
Tags: government debt
Related Articles
- China Continues Buying Up American Government Debt While it may not be surprising to some economic experts, many Americans remain apprehensive about the state of Chinese finances and their impact on the US economy. Many commentators are
- Use Cash For A More Nutritious Grocery Store Visit Trying to eat healthier? You may want to try paying with cash instead of plastic. At least that's what a new study published in the Journal of Consumer Research says.
- Frugal Millionaire Shocks Small Town Ninety-eight-year-old Verna Oller passed away on May 10, leaving a hole in her community of Long Beach, Washington. It's a hole big enough for an indoor swimming pool-- the community's
- Many Americans Getting Second Jobs To Cover Holiday Expenses Christmas may be a few months away, but many companies are hiring holiday help now. And to avoid the financial drain of the season a new CouponCabin.com survey found that
- Freddie Mac Repurchases Sub Debt Last September, Freddie Mac bought back a majority of its subordinated securities before the company and its counterpart Fannie Mae were taken over by the federal government. Most investors expressed the