Home' Trinidad and Tobago Guardian : April 30th 2013 Contents A31
Tuesday, April 30, 2013 www.guardian.co.tt Guardian
WASHINGTON---After all, China isn t the US s
biggest creditor. America is.
The bulk of the national debt---soon to exceed a
staggering $17 trillion---is held by the Federal Reserve,
Social Security (public pension) system, private pen-
sion plans, US banks, mutual funds, insurance com-
panies and individual domestic investors.
China is responsible for just a shade over 7 per
cent of that total debt. And while it remains the
single largest foreign lender (just ahead of Japan),
China s been slowly trimming its holdings, down
from nearly 10 per cent a few years ago. Overall,
all foreign investors, including national central banks,
account for roughly one third of the total outstanding
federal government debt.
Also, China is suddenly having debt problems of
its own. Heavy recent lending by its banks comes
as the recovery in the world s second-largest econ-
omy seems to be stalling. The export giant posted
a rare trade deficit in March.
The national debt will soon be front-and-centre
again as a deeply divided Congress wrestles with
an expected new Obama administration request to
increase the government s borrowing authority, the
legislatively set debt ceiling. The higher limit would
not authorise borrowing for new spending but just
enables the government to pay all the bills already
The upcoming summer debate could be a repeat
of the divisive debt-ceiling crisis in August 2011
when weeks of political irresolution nearly plunged
the US into its first-ever financial default---and did
trigger a downgrade in the government s once-ster-
ling credit rating.
Congressional leaders are already drawing lines
in the sand for the next big fiscal fight. House
Speaker John Boehner has said the only way the
Republican-led House will go along with raising
the country s borrowing ceiling was if President
Barack Obama and the Democrats came up with a
"dollar-for-dollar" amount in budget cuts.
Yet despite China s relatively shrinking share of
the US debt, it continues to be the top poster child
for financing America s deficit spending habit, a
favourite target for politicians in both parties.
It s not as if US leaders approach China s bankers
extending a tin cup and begging for loans. The Chi-
nese government does what many individual
investors do ---it simply buys and holds widely avail-
able US Treasury bills, bonds and notes.
US politicians see the mountain of debt, but
investors globally view US Treasury securities as
among the world s safest financial havens, reflected
in part by their current super-low yields.
China holds just $1.22 trillion in US Treasury
bonds and bills, or 7.3 per cent of the current $16.88
trillion total national debt, according to the Treasury
Department s "Major Foreign Holders of Treasury
Securities" for February, the most recent month
China also holds about $200 billion in long-term
securities of US agencies, including bonds of nation-
alised mortgage holders Fannie Mae and Freddie
Mac, although it has been steadily trimming these
holdings since 2008.
Social Security holds $2.7 trillion of the debt in
its trust fund, in the form of special unmarketable
Treasury bonds. The Federal Reserve holds a $1.7
trillion portfolio of Treasury notes and bonds, much
of it accumulated over the past four years with its
heavy purchase of US securities to stimulate the
economy and hold down interest rates.
"China is neither an enemy nor a friend, it s a
rival for economic success and for global influence,"
said Bob Sutter, an international affairs professor
at George Washington University. "Americans dislike
the Chinese government and they want to compete.
But they don t want to confront China, and so they
want to get along." (AP)
US loans from
China in focus for
Goodyear workers march
toward the company's
headquarters in Akron,
Ohio, as a strike against
the company began. With
the backdrop of an
shrinking unions and
Goodyear and the
negotiating a new
national contract to
replace the current one
expiring July 27. AP PHOTO
GOODYEAR WORKERS PROTEST
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