China Calling in Its Loans: A Discussion

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China Calling in its Loans
"China is more than happy to own a large portion of the U.S. debt," as this gives it great economic clout within the international market (Amadeo, 2012). This power has the potential to seriously damage the American economy if the nation was to suddenly dump its American loan holdings. If this were to happen the value of the dollar would drop dramatically, domestic interest rates would spike, and the United States would be left standing alone to try to pick up the pieces.
China has seen massive economic growth in the past few decades. Since its reopening in the 1970s, the country has begun trading and buying foreign currencies with western nations like the United States. When the housing crisis which began to unravel in 2007 really hit the American economy hard, China was more than happy to step in and put up funding to help keep the American economy, one of its biggest customers, in a delicate balance. Unfortunately, the American economy has been incredibly slow to recover from the last major recession. As such, it has increased its dependence on Chinese funding to back American debt.
China has taken advantage of this situation tremendously. Using U.S. Treasury holdings as leverage, the Chinese economy has seen an increase of 10% growth in its economy that was already on an upward swell. As the research suggests "Owning U.S. Treasury notes helps China's economy grow by keeping its currency weaker than the dollar. This keeps products exported

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