“How’s a country with a 232 percent debt to GDP ratio go around buying yuge amounts of bonds.”
They kind of have to. They get paid in dollars for their exports to the USA, and have to pay in dollars for their huge imports of oil, gas, raw materials and food.
Big accounts of US Treasury bonds are kind of like their checking and savings accounts in dollars (more like their savings accounts). US Treasuries are about 1/3 of China’s total foreign reserves (around $1T out of $3T). About another trillion in China’ foreign reserve are other dollar based accounts. Probably around 2/3 of a trillion in Euros, and the rest in Japanese Yen and British Pounds.
They need around a minimum of around a half trillion in hard foreign reserves (overwhelmingly dollars) on account, just to keep cargoes clearing their ports, in and out, at current volumes.
Their total debt load economy-wide is many, many times their foreign reserve holdings. They may keep a good checking account balance to cover contingencies, but they are mortgaged to the hilt. It is like they have a big house and flashy car, but are living far beyond their means, juggling credit cards and barely making minimum payments.
Boy that was the best explanation that could have been given.
Er...I hate to ask but we all know what happens to PEOPLE with the big house and flashy car who can Barely pay their credit cards every month.
At some point MANY give up and do debt settlement for pennies on the dollar or claim bankruptcy.
So I’m afraid to know what an entire country would do.
[They kind of have to. They get paid in dollars for their exports to the USA, and have to pay in dollars for their huge imports of oil, gas, raw materials and food.]
Your analysis is correct. May I add that when they purchase US debt it depresses the value of the Yuan v US dollars. China has used that for years as part of it’s currency manipulation.
The people who fret about China selling our debt don’t realize it would hurt China by making their goods more expensive here...the opposite of what they want.
The ones who fret about them “calling” our debt are just completely ignorant.