What happens if China stops buying US bonds?
If China (or any other nation that has a trade surplus with the U.S.) stops buying
If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.
As a result, if the United States and other countries were to stop trading with China, it would disrupt global supply chains and cause economic disruptions in many countries.
More importantly, China's footprint in the U.S. bond market is a fraction of what it once was. China owns less than 3% of all outstanding Treasuries, the smallest share in 22 years, and again substantially down from the record 14% in 2011. Granted, China also likely holds Treasuries via other countries like Belgium.
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.
What happens if all countries stop buying US treasuries? If all countries stop buying US treasuries, it would have a significant impact on the US economy. The US government would have to find other buyers for its debt, which could lead to higher interest rates and lower long-term growth.
As a result, totals from January 2023 are lower than reported. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
In 2021, of $151.1 billion in the U.S. exports to China, the top commodity were Machinery and Mechanical Appliances (23.9% of the total U.S. exports), Agriculture (20.9%), and Chemicals, Plastics, Rubber and Leather Goods (16.6%).
In America, estimates say that Chinese suppliers make up 70-80 percent of Walmart's merchandise, leaving less than 20 percent for American-made products,” according to the Alliance for American Manufacturing.
Of the 2.7% of U.S. consumer purchases going to goods labeled “Made in China,” only 1.2% actually represents China-produced content. If we take into account imported intermediate goods, about 13.9% of U.S. consumer spending is attributable to imports, including 1.9% imported from China.
Why is China dumping US Treasuries?
China has offloaded USD 22.7 billion in US treasury bills recently over concerns over security and a further delay to expected interest rate cuts by the American Federal Reserve, amidst its intensified strategic rivalry with Washington.
With $1.1 trillion in Treasury holdings, Japan is the largest foreign holder of U.S. debt.
Including both private and public debt holders, the top three December 2020 national holders of American public debt are Japan ($1.2 trillion or 17.7%), China ($1.1 trillion or 15.2%), and the United Kingdom ($0.4 trillion or 6.2%).
Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
China owns 380,000 acres of land in the U.S. Here's where
The Smithfield feed processing mill producing food for nearby hog-raising farms in Milford, Utah. In 2021, a Chinese company bought land near an Air Force base in Grand Forks, N.D., sending lawmakers into a frenzy.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
The US dollar has been the world's reserve currency for decades, but its dominance is fading. Sanctions against Russia have spurred other countries into considering backup currencies for trade. US monetary policies, the strong USD, and structural shift in the global oil trade also contribute.
If dollar collapses, foreign investors and central banks stop demanding dollars. U.S. bond prices will fall or U.S. interest rates will rise. Mortgage and credit card rates will soar, sending the U.S. economy back into recession.
On the other hand, Mexico holds about $34B of US debt. So if we were to make a balance, Mexico owes the US $134B, more or less, or about 8% of what it makes in a year. The United States has a services trade surplus of an estimated $8.8 billion with Mexico in 2018, up 19.1% from 2017.
Who has more debt than the US?
| Economy by Gross Debt | % of GDP (2023) |
|---|---|
| 🇸🇬 Singapore | 168% |
| 🇮🇹 Italy | 144% |
| 🇺🇸 United States* | 123% |
| 🇫🇷 France | 110% |
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
Chinese nationals have long made the journey to the United States seeking economic opportunity or political freedom.
Most imports came from the United States, Ukraine and Brazil, with Ukrainian imports accounting for a third of the total amount. As a result, China's Food Silk Road is creating new food trade routes between China, Europe, Russia, Central Asia and South Asia, as well as the Middle East and Africa.
China has a lot more options than before as to where to import the food grains it needs. It still imports a lot of food grains from the US but not like the quantity before 2018. It has the world as its granary now and that includes the food grains from Africa in the future.
