China’s Dilemma

I recently read Roy’s blog on the US’s debt to China. I think he clearly states the reason for China to postpone collecting its debt and continue buying bonds to financially supports the U.S. In the recent news, China mocked U.S for stumbling on a debt deal by depicting the nation as a beggar. Technically, the reason that U.S owned 17 trillion dollars to China, Japan and other countries was the squandering spending habits of the average Americans as well as the government’s lack of regulation. This huge debt was created because the amount of tax revenue it collects each year cannot cover the huge deficit it has. Similarly in Europe, Greece and Spain had borrowed money from each other and other European countries by an amount that they cannot afford to pay back. This created a economic recession in the Europe.

However, in the US-China case, it seems unreasonable that China kept buying the US bonds after the huge debt. The reason is simply that China’s economy relies heavily on export and U.S is one of its largest clients. So if China urges US to pay back its debt, the Americans then have no money to spend on the Chinese goods, especially during holidays. However, now China is trying to stand up on its own feet by laying more emphasis on innovative industries and increasing the domestic consumption . And the U.S. must stop its “spending splurge and borrowing binge and restore fiscal sanity before it is too late.”

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