WASHINGTON—Last month, the U.S. Treasury Dept. revealed that China sold a record amount of Treasury bonds last December, raising a question over how China—a top hold of U.S. debt—could potentially alter the fortune of the U.S. economy.
Economists are increasingly worried over the nation’s dependency on China to finance its debt, and China’s recent signals that it may be shifting away from the U.S. dollar as a reserve currency. In addition, China is notorious for actively manipulating the value of its currency to sustain wide trade imbalances with developed nations.
“China has pursued mercantilist policies to promote its interests and increase our dependence on their production and their capital … China has emerged from the global recession stronger than ever, expecting its status as America’s banker to convey new political power,” said Michael Wessel in his opening remarks at the U.S.-China Economic and Security Review Commission last month. “The United States government … cannot easily extricate itself from its growing financial dependence on China.”
Wessel’s statement set the general tone for the hearing, but most of the experts who testified took exception to the notion that China is “America’s banker.”
