I’ve asked before-and never gotten an answer: How in hell did China wind up holding large amounts of US debt ?
It’s not something that happened yesterday.
China has run a huge trade surplus for years. The additional funds collected were used to buy US bonds. We sell them to anybody, and China liked them because they have traditionally been the safest investment on earth.
It also helped buoy the US economy, which increased China's trade surplus, which helped them buy more bonds. Now they are sitting on about 800 billion dollars worth of them.
These dollars are ultimately only good here in the good old USA. They buy US Treasury bonds to "use" those extra dollars rather than buying more from us.
Why wouldn't they just buy more of our stuff? The same reason you and I don't expect Kroger or Walmart to turn around and buy something from us using money we just spent in their store. That is their profit. They will use that cash at some point but until then they are content to let it sit and draw interest (while hoping like hell we don't crash it and make their bonds worth a whole lot less). Maybe they'll use it buy a few of our airplanes or really good Oregon beer. Or maybe a Senator or two.