China is not America’s banker

China is not America’s banker, contrary to what many people have claimed. They’ve also claimed that because China is supposedly America’s banker, America must continue the Kissingerian policy of appeasement towards China. But they’re wrong.

China is not America’s banker. China must buy American T-bonds because it cannot buy anything else. It cannot buy the T-bonds of other countries, nor gold, nor anything else. The huge amount of money that China earns every year on exports is so big that it can be invested only in American T-bonds.

America doesn’t need to ask China to buy US T-bonds, because it could ask someone else to do so (e.g. Japan). Most of America’s public debt is NOT owed to China. 40% of it is owed to the Federal Reserve and other governmental agencies; i.e. this part is owed by one part of the US government to another. Of the other 60% part, only a small part is owed to China. Most of the foreign debt owed by the US to foreign countries is NOT owed to China.

Also, America is China’s biggest export market. The US can buy cheap products from emerging countries other than China (e.g. Vietnam, India), so it doesn’t need China as a producer. (If the Congress instituted protective tariffs, America wouldn’t need any imported products from anyone, except fuels, and the American industry would rebound.) But China cannot survive without America as an export market. 17.7% of China’s export goes to the US. America is China’s biggest export market. China’s total exported cargos, as of 2008, were worth $1435 bn. 17.7% of 1435 bn is $253.995 bn. Only an economic suicider would give up such a huge amount of money. And China would do so if it ruined the US economy (e.g. by selling its stock of American T-bonds).

America doesn’t need China. But China needs America.


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