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China.. where do they get funds to buy US Debt?
Old 01-10-2018, 12:48 PM   #1
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China.. where do they get funds to buy US Debt?

So I have often wondered where all the funds come for China or even other countries to buy US government debt. Are these countries budgets that far in the black they have extra to invest?

Or is it the equivalent of their Fed buying debt? Ive always read the US Fed's quantitative easing was not sustainable and would soon implode. China & Japan seemed to pull it off for decades. What am I missing here?

If these countries were not buying US gov bonds what would they do with the cash? Build schools, roads, etc at home? Again, they have been carrying the US for decades so they must have some way to make it work.
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Old 01-10-2018, 01:25 PM   #2
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I suspect the funds from their huge trade surplus with US are finding their way into our treasury market and real estate and you name it.
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Old 01-10-2018, 01:39 PM   #3
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I suspect the funds from their huge trade surplus with US are finding their way into our treasury market and real estate and you name it.
If most of the goods that created the trade surplus were government owned enterprises that would make some sense. But still Foxconn must pay the employees and their suppliers. Are we saying Foxconn,and many other enterprises, have that high of a profit they are able to kick up to the government to buy US Debt?

I guess it is somewhat like megacorp here in US paying out huge corporate bonuses and / or dividends. Still trying to wrap my head around kthe concept.
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Old 01-10-2018, 01:47 PM   #4
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China sells the US stuff made with cheap labor, and the US sells China pieces of paper representing the promise of later payment with interest.
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Old 01-10-2018, 01:48 PM   #5
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Not sure how old the OP is but 25 or 30 years ago, it was the Japanese that the Americans were worried about. They came over and bought up choice real estate, bought into the market, etc...

How did that end up ??

The Chinese have a FAR larger chance of imploding. "Communist Capitalism" might make for a decent slogan but in practical terms... I'd say it is in the last fortnight of its best before date...
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Old 01-10-2018, 01:51 PM   #6
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When the economy is largely controlled/run by the government and one has a 350 billion dollar trade surplus (2016) that leaves a lot of money that has to be placed somewhere. It seems like much less angst about it than there was in the 70s when Japan had the (then) huge surplus and was buying everything in sight. Japan continues to have a 70 billion dollar surplus followed by Germany with a 65 billion surplus. I'm likely a economic simpleton but I don't think this bodes well, especially the deficit with China who is not exactly an ally. Though I guess one could argue that they would be hurt more if trade was curtailed.
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Old 01-10-2018, 01:56 PM   #7
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They may be private investors. There are many billionaires and multi-millionaires in China.They need a safe currency to park some of their dough as well.
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Old 01-10-2018, 02:39 PM   #8
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Quote:
Originally Posted by Koogie View Post
Not sure how old the OP is but 25 or 30 years ago, it was the Japanese that the Americans were worried about. They came over and bought up choice real estate, bought into the market, etc...

How did that end up ??

The Chinese have a FAR larger chance of imploding. "Communist Capitalism" might make for a decent slogan but in practical terms... I'd say it is in the last fortnight of its best before date...
Also, China has a lot in common with the US, including ~100 mega/major cities and similar large land mass. Both have about 350ish million middle class folks.

But here's where China's shine looks a like a very thin veneer. ONE BILLION peasants (~10 million living in caves) and, due to years of "population management," a dire shortage of women. There is significant unrest in inner and western China. Problems with both Islamist (read uigers) unrest and plain old poverty results in police and military crackdowns. I learned this from a gal from Shanghai whom I worked with for a couple years (she went on to get permanent residency in the US), as well as an IT consultant from Beijing that did some tech work for me (he married an American and was working on his green card). Neither had any desire to return to China.
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Old 01-10-2018, 03:41 PM   #9
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Quote:
Originally Posted by KenZ71 View Post
If most of the goods that created the trade surplus were government owned enterprises that would make some sense.
That is exactly the case. Most Chinese firms are owned by the Government.

Quote:
First, the top 12 Chinese companies are all state-owned. They include massive banks and oil companies that the central government controls through the State-Owned Assets Supervision and Administration Commission of the ruling State Council (SASAC), which appoints CEOs and makes decisions on large investments. Of the 98 Chinese companies on the list, only 22 are private.

China's 12 biggest companies are all government-owned | Fortune
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Old 01-11-2018, 01:32 AM   #10
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Thanks for the discussion.

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