LETTER: Don't exaggerate China's claim on US

info@islandpacket.comApril 17, 2013 

A recent letter to the editor insinuated that the U.S. borrows 40 cents out of every dollar (whatever that means) from China. Can we once and for all set the record straight: We don't borrow from China. The fact is that the Chinese hold an enormous amount of U.S. government bonds. However, they acquired these bonds with the cash they received from selling products to U.S. consumers. In essence, they have built up a substantial I.O.U or a "call" on future U.S. production of goods and services to balance the trade surplus they have accumulated.

Since our major economic problem seems to be high unemployment, it would be a good thing if the Chinese began spending their accrued dollars on U.S. goods and services, thus increasing our economic growth and lowering our unemployment. Of course, the Chinese could sell those bonds in the market, but that would mean they would have dollars again that yield nothing, so the strategy that cynics fear makes no sense at all.

The Chinese government's main goal is to employ 40 million new workers each year so that its economic policies won't upset the foreign demand for their output.

Thomas E. Nugent

Hilton Head Island

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