China Is Not America's Banker

'China is not in any practical sense â??Americaâ??s banker.â? China holds just 8% of outstanding US Treasury debt; American individuals and institutions hold 69%. China holds just 1% of all US financial assets (including corporate bonds and equities); US investors hold 87%. Chinese commercial banks lend almost nothing to American firms and consumers â?? the large majority of that finance comes from American banks. Americaâ??s banker is America, not China.

It is more apt to think of China as a depositor at the â??Bank of the United States:â? its treasury bond holdings are super-safe, liquid holdings that can be easily redeemed at short notice, just like bank deposits. Far from holding the United States hostage, China is a hostage of the United States, since it has little ability to move those deposits elsewhere (no other bank in the world is big enough).

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