China's Threat to the Us Economy

After watching the video " Ten Trillion and Counting", I found that the United States borrows money from China, Japan, Europe, and even Saudi Arabia. Borrowing money is something that the government shouldn't rely on for the incoming years because it has the chance of leading to national depression. They continuous borrowing from other countries will leave an immense debt to be payed off. When expenses increase the income yearly then a deficit will run. If those deficits add up then it will turnout as a debt. Although this is a lot money, most of that money is controlled by foreigners. Foreign countries are the highest holders of debt that the U.S. is against. "At the end of April, China alone held $1.1525 trillion of U.S. debt, and all foreign nations combined held over $4.4 trillion, about half of the total public debt. The remainder is split between a wide variety of businesses and individuals around the country and the world (Gofman)." America is low on taxes that and the way balance that problem is to have lend some money.

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.

These effective strategies helped Hong Kong overcome the financial crisis. All these facts fully demonstrated that China is a responsible big country. After the Asia financial crisis, the importance of China's economy has been brought into focus; China's neighboring countries have begun to recognize the influence of the Renminbi.

In 2008, the Global Financial Crisis broke out; both the American economy and the economy in the West suffered a hard blow. However, a big economy system in the East emerged unexpectedly. China is now able to challenge the America’s decades-long dominant position in economic area. Started during the middle of 1990s, China’s manufacturing industry developed rapidly that billions of exports were floating out, and China was given the title of “the world’s factory”(BBC). By the end of 2010, China with a GDP of $5.8 trillion, surpassed Japan’s GDP of $5.48 trillion, became the world’s second largest economy system (BBC). China also exceeded Japan became America’s largest foreign securities holder. Since then, China has been seen as the US’s

They now exhibit a challenge in terms of debt, deficit and surplus. The national debt and deficit possess distinct definitions. The budget is the amount of money that the government works with within a given fiscal year and allocates to the different programs. The deficit is when expenditures exceed revenue and is added to the debt at the end of the year. In the last ten years we have experienced enormous deficits that may communicate to the international community that the United States might have trouble producing a balanced budget. This is an accumulative effect as the national debt is combined with the debt held by federal securities outside and inside the government and the public. Foreign country debt is included in the national debt as of March 8th tops $16 trillion dollars. Debt owed to foreign countries like China and Japan equates to a little over $1.1 trillion. Yet, despite the United States’ owing large amounts we are still considered financially sound because of our credit rating. According to Thompson from CNN Money, the United States’ credit rating is in jeopardy of being downgraded because of a weak debt ceiling (Thompson, 2013). This may increase the risk level of investing in the United States.

If you’re like most citizens, you are probably unaware of how severe the debt crisis is for the United States of America. An eye-opening article titled “America’s Debt Time Bomb” by John F. Ince, points out the two components of the financial crisis in the United States: the national debt and the current account trade deficit. Current estimates of the rising national debt in America are upwards of $19 trillion, and growing by over a billion a day; severely increasing the chances of a major economic crisis. For instance,” to finance domestic deficits, American policy makers have started to engage in dangerous borrowing patterns from overseas lenders” discloses Ince. When America borrows, we give foreigners a claim to the financial assets

Whenever the topic of the American Economy is mentioned the first thing that pops in our heads is,”debt”. The debt of the U.S. has been a controversial topic for years now, especially in our politics. The U.S. debt as if now is 18 trillion dollars, but we didn’t always have this debt.

A million dollars may seem like a lot of money; well multiply that by that by 19 million: 19 trillion dollars -- that is how much the United States owes to other countries. The United States’s debt is a problem that just keeps getting worse. It has been rising since 1775, and has now reached almost 19 trillion in 2016 (Friedman). The amount of government spending is far too high in Social Security, Medicare, Medicaid, and Obamacare (Amadeo). The debt has many effects which may eventually cripple our country. The United States currently owes China $1.185 trillion, and Japan $1.224 trillion. Although experts speculate that it won't happen, if either China or Japan were to ask for their money that the US owes them, it would cause a worldwide

on page 168, we continue borrowing money from China to go to war with other nations

The United States held 24.6% of world income in 1980 and 19.1% in 2011. (Sachs 2012) Many also believe that China is set to become the world’s largest economy in the near future. However, the ‘danger’ for US power is not that China will become the strongest economy on the global scale. As Drenzer argues, China ‘won’t prosper economically, as it won’t embrace capitalism’. In the long run, the danger to the US is that US power will decline ‘on all fronts’, not just economically. (Drenzer, Rachman & Kangan)

since 2000 (Edwards, S., 2005).” As a result of the increase in foreign demand for U.S. assets, Americans have had access to foreign investment enabling the United States to function with large deficits for years. Looking forward, the United States dollar and the economic health of the country is very dependent on foreign investment in U.S. assets. A potential risk looms in the chance that Asian central banks might lower their demand in U.S. assets resulting in a sharp decline in the U.S.

Furthermore, the nation will go deeper into debt with the rest of the world as Americans continue to rely on the strong flow of foreign money, particularly from central banks in Asia, to finance the trade gap. China, Japan and other foreign governments are some of the biggest holders of government securities, lending money to cover the substantial federal budget deficit and helping to keep interest rates and home mortgage costs here relatively low. As a result, American consumers are able to spend more and save less.

Finally given the slowing economy in Asia the International Monetary Fund (IMF) has reclassified the yuan. Previously the IMF considered it to be “substantially undervalued” compared to other currencies. The IMF has softened its tone toward the Chinese yuan and it is now considered “moderately undervalued”. This new designation makes it harder for the United States government to make a case against and therefore policies to target the imports based on the Chinese yuan. (Davis, 2012)

Secondly, the fixed dollar-pegged exchange rate system and monetary policy, the independence of the existence of a fundamental conflict, undermine the effectiveness of monetary policy cannot meet the needs of economic development. Monetary policy autonomy is essential for China’s macroeconomic stability; monetary policy should take precedence over the independence of significant exchange rate stability. But the Yuan against the U.S. dollar exchange

After years of speculation, China has finally dropped its peg to US dollar. The pegged value of the RMB or Yuan has been adjusted to 8.11 from 8.31. This humble revaluation of 2.5% will for the most part do little to ease the United States’ trade deficit. It does however have significant political and market implications. Most US Senators feel that the revaluation move was too small and that China needs to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB’s predicted undervaluation of 30-40%.