Understanding Sovereign Debt Between The US and China

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There have been talks with how the sovereign debt held by China over the US economy affects the lives of everyday people and this is where the article by National Debt Relief comes in. The article titled “What’s The Deal With China And US Debt?” released September 21, 2017 aims to clarify how this debt situation affects economies of both countries and what it means to American consumers.

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China is buying us debt because of the projected stability of the US economy

There have been talks with how the sovereign debt held by China over the US economy affects the lives of everyday people and this is where the article by National Debt Relief comes in. The article titled “What’s The Deal With China And US Debt?” released September 21, 2017 aims to clarify how this debt situation affects economies of both countries and what it means to American consumers.

The article starts off by pointing out that this situation has a lot of consumers anxious and worried that China, and other countries that holds US debts, could exert their control over the economy. They can twist desired outcomes and dethrone America as a superpower as they wield trillions of debt.

For a fact, China does hold a big chunk of sovereign debt of the US. They have over $1 trillion at present and is poised to get bigger over time. The article shares that there are a number of reasons why countries buy debt of other countries. For one, they are able to peg their currencies and even participate in the global market.

In the case of US and China, it has a lot to do with how the latter want to weaken its currency in the global market. It might sound counter-intuitive when countries are working hard to strengthen their economy and their currency. However, it is for the benefit of China to keep their currency weak versus the dollar.

The country explains that China relies heavily on exports of goods to the US to finances its growth. In doing so, they have to keep the Yuan relatively weak to keep its prices low and be able to penetrate US market. As they buy up US debt, they inflate the dollar, where the yuan is pegged, and weaken their own currency.

More than anything, China is buying us debt because of the projected stability of the US economy. They also need it to keep their low price point to its current level. To read the full article, click https://www.nationaldebtrelief.com/whats-deal-china-us-debt/

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Paul Ritz
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