Who needs the other more, the US or China? While the US has continually stated that its economy is solid, available facts have proved otherwise. Today, China is the principal bearer of the US government debt.
Why is China so important to the US economy?
The United States need China for 2 main reasons:
– China is the leading source of low-cost factory-made goods.
– China is the prime holder of the federal government debt.
Nobody thought much of the Chinese economy two decades ago. As a matter of fact, a majority of people thought that the Japanese economy would eclipse the US economy. However, this is not the case as the Chinese are fast rising and taking over the world.
China has managed to liberalize its economy since the 70s. The nation is not only open to foreign investors, but is also assertively following economic growth. While China is still a fairly poor nation, globalization has enabled the coastal regions to develop by leaps and bounds.
What makes China important to the US economy?
Each time Chinese manufacturers transport their merchandizes to the US, they are paid in US dollars. They then give these dollars to their government in exchange for Chinese Yuan. In return, the Chinese government uses the US dollars to purchase US Treasury debts. Consequently, China has become the biggest sole proprietor of Treasury debt. By opting to invest so much cash in treasury bonds, the Chinese government has singlehandedly managed to minimize the interest rates which the US government has to pay.
The million dollar question therefore is, “Will China have a say in US matters in a few years to come?”