Friday, April 17, 2015

Japan is now the biggest holder of US Debt, surpassing China

Source: Quartz

China is no longer the biggest holder of U.S. Treasury debt, a position it has held for over 6 years. There are two components to this change. First, Japan has been consistently buying a lot of bonds in the past couple of years, and second, China's waning economic growth has correlated with less U.S. bond purchases.

As Matthew Yglesias from Vox points out, there's been a lot of media buzz about the U.S.'s big debt to China, and our resultant economic dependency on them. However, he also explains that that debt exists not because the U.S. Treasury is in dire need of more money, but because countries like China and Japan want to buy in; it's safe investment, and for countries who do so much export trade with the U.S., cycling the money around is good for growth.

Do you think the debt to China something to be worried about? Otherwise, is there something to be said about the state of Japan and China's respective economies by the stats and patterns from above?


Anonymous said...

Besides a slowing economy, and less exportation, China has been looking to diversify its investments, according to Martin Crutsinger of ABC News. Evidently, even without any changes in economic growth, China would have less funding to invest in American bonds either way. Meanwhile, Japan is attempting to circulate money as much as possible, and has incentives to invest overseas at the moment. (Notice both countries increased amount of bonds bought starting from '09 to about '12, coinciding with the Recession.) I don't think Japan surpassing China in amount of bonds bought is something to be worried about. Clearly, both countries are still rather heavily invested in the U.S. Treasury. The debt to China is something that definitely should be thought about, and dealt with, but it is not a worrying, "must fix right now" situation at the moment.

Katie Wysong 6 said...

I don't think that the debt to China or Japan is particularly worrying. Well over half of US debt is owned domestically. Most of it is owed to the Social Security Trust Fund. The amount China and now Japan owns is significant, but nothing to really be worried about. They both use it for their own benefit, but not really at the expense of the US government or citizens. Additionally, the bonds are being sold, because there is a high demand for them. The other countries, and investors see the US as a good investment.

Anonymous said...

Policies out the wazoo, strange investments and intriguing plans for the future- China is looking to start a new era. With 0 debt and holding the largest surplus of government funds, China is likely to surpass even the U.S's purchasing power soon, for which they no longer need to purchase bonds from the U.S as a safe investment and buy other things instead. Japan's economy however is not looking so great. Though China's economy is slowing down, Japan's economy is hardly growing. Therefore, compared to the graph to which why Japan is surpassing china, Japan is looking to spend more money and hopefully secure their economy for the future.

Alex Medwid said...

I don't think the debt to China is something to be particularly worried about, as the economics of bonds don't make it particularly scary to be in debt to other nations. However, it is probably still better to be in debt to Japan since the US is on friendlier terms with Japan than with China.

Bonds are sold voluntarily by the US government, and thus it is for the most part impossible for bonds to pose that big a risk to the country no matter who holds them.