Why China Still Loans Money To The U.S.

[No DUplicitous DUpe]

Why China Still Loans Money To The U.S.
(posted with permission from: http://sane-ramblings.blogspot.com/2011/07/why-china-still-loans-money-to-us.html)

China is a huge critic of U.S. government wasteful spending yet continues to loan the U.S. money in various forms. Why? Because it already owns $1.5 trillion in U.S. debt and a U.S. financial collapse could destroy the value of those holdings. How easily could such a collapse come?

China need only put away its check book and the U.S. government would be in dire straits. How is that for a national security issue? China can squeeze the U.S. government with the click of a computer keyboard if it wants to. But if it takes too strong an action, it threatens its biggest marketplace as China manufactures much of what Americans buy.

And if the financial markets come to believe China is ready to sell off its U.S. debt, a panic would ensue taking down the value of China's holdings with it, as buyers would pay pennies on the dollar. So for now, this shotgun marriage will continue.


To learn more about the China - U.S. financial relationship, please see "China's Treasury Holdings Make U.S. Woes Its Own," New York Times (6/19/11) http://www.nytimes.com/2011/07/19/business/china-largest-holder-of-us-debt-remains-tied-to-treasuries.html?_r=1&nl=todaysheadlines&emc=tha24

[elocs]

dupe

[pitohui]

2. and that's bad...how exactly?

by making china our partner we have reduced the chances of large-scale thermo nuclear war down to virtually nil

there is still the risk of terrorist attacks don't get me wrong but as far as wide-scale planet busting war...that is now bad for business

you really think that's a bad idea? i was brought up in fear of our supposed 15 minute response time, there was an entire generation told that we could die at any moment in a world-ending nuclear fire

in a global world, that fear and that risk is HUGELY reduced

some things might be worth the $$$

[elocs]

7. I missed the part where I said it was "bad", but I don't believe it was anyone's "idea".

[elocs]

1. It's the old adage, "if you get in deep enough with someone, you become their partner".

China is our partner now.

[Vinnie From Indy]

3. If you owe the bank ten thousand dollars, they own you

If you owe the bank a billion dollars, you own the bank

[No DUplicitous DUpe]

5. The Author adds...

China is not our partner, they are our lender and for all those who borrow money from Bank of America or Citibank, I doubt they view those institutions as being their “partner,” nor do those institutions view themselves in partnership with their borrowers. When China decides it is no longer in their best interest to loan the U.S. money, they will do as they have been doing the last 1 – 2 years, buy short term paper to keep the market stable and quietly be a net seller of U.S. government debt. They may also demand a higher rate of interest to roll over their U.S. short term debt.

[indurancevile]

6. you sure?

In this environment then, what is Citigroup’s best method of operation? Once
reentry to the market was allowed, Citigroup pushed hard to maintain its control in China
by avoiding joint ventures and operating independently. As this strategy stalled and its
competitors gained the upper hand in the country, Citibank changed its approach to
embrace joint ventures and entertain the idea of buying into the state bank system...

http://repository01.lib.tufts.edu:8080/fedora/get/tufts:UA015.012.DO.00098/bdef:TuftsPDF/getPDF


AGRICULTURAL BANK OF CHINA PARTNERS WITH CITI FOR INTERNATIONAL PAYMENTS

HONG KONG - September 14, 2009 – Citi's Bank Services Group, a division of Global Transaction Services, has announced a partnership with Agricultural Bank of China. Under the landmark mandate, Citi will provide the Agricultural Bank of China with international payments processing for on-site check services that enable expansion of its banking services to consumer clients.

For Agricultural Bank of China, the partnership will support check payments for 16 different currencies from a single Citi account. Aside from improving operational efficiency, Citi's on-site check solution will provide Agricultural Bank of China with fraud prevention upgrades, 24-hour foreign exchange capabilities, and daily foreign exchange spot rates. All checks issued through Citi's solution will be customized with Agricultural Bank of China's corporate logo.

http://www.citibank.com/transactionservices/home/about_us/press_room/archives/2009/2009_0914agric.jsp


Citibank Partners with Schroders to Become First Bank in China to Offer Global Mutual Funds

http://www.allamericanpatriots.com/48730754_investing_citibank_partners_schroders_become_first_bank_china_offer_global_mutual_funds


SHANGHAI PUDONG DEVELOPMENT BANK
Citi currently holds a 3.78% stake in Shanghai Pudong Development Bank(SPD Bank), with the option of increasing this stake subject to regulatory approval. Citi holds one seat on SPD Bank's Board of Directors. Citi provides SPD Bank with product and technical assistance to support its strategic vision and objectives as part of a long-term commitment to this strategic relationship.


GUANGDONG DEVELOPMENT BANK

Citi holds a 20% equity stake in Guangdong Development Bank (GDB), after a consortium that it led completed an agreement to purchase an 85.6% stake on December 19, 2006. As an investor and technical services provider with significant management influence, Citi aims to further enhance GDB's corporate governance standards...

GDB operates as a locally licensed bank with its own board, management and brand identity. Citi has a total of six members on GDB's Board of Directors, consisting of five non-independent Directors and one independent Director.

http://www.citi.com.cn/html/en/about_us/Investment_program.html


China is just marginally a bigger lender to the US than Japan. The people of the US are the biggest creditors of the US (in the form of social security).

[gratuitous]

4. China keeps rolling the loans over

Because the American worker of 2011 is far more efficient and productive than the American worker of 1980. Worker wages, however, have not even kept pace with inflation, so all that additional wealth created by American workers has to go somewhere if not into the pockets of the Labor that created it. China is more than happy to be one of the beneficiaries.

[kenny blankenship]

8. It's also necessary for them to keep their huge exporting edge.