China is buying debts because they are a good investment. The go up in value, rather than down.
You get a good long term return on them, and controlling another countries debts means that they cannot act against you in any substantial way. For example, China owns the lions share of America's treasury debts. This means that the value of the dollar is kept high. A high dollar and a low Yuan means that it is cheap for American's to import Chinese goods. Which means a lot more money for the Chinese economy as Americans keep shopping and keep China's export market strong.
If China were ever to sell America's debts on the open market then the value of the dollar would plummet. This would make it very hard for America to buy the things that it needs. Like overseas oil. Which would effectively destroy the American economy and the standard of living for the average American. So, America cannot act significantly against China for fear of this threat.
China has nukes, it sells weapons to all kinds of shady regimes, it's currently doing terrible things in Tibet, and it's backing up corrupt regimes in Africa. All kinds of things that America would normally get up in arms about. But Obama and Bush both kept their mouths tightly shut because China owned them.
China is trading with Iran, North Korea, Zimbabwe, all of whom are on the top ten list of loony countries who persecute anything that moves, but America is saying nothing.
Buying treasury debt means that there cannot be any substantial action against China from the US.
BTW, "China Peril" is made up, there's no such thing. It's a throwback from the cold war used to scare people who watch Fox news into knee jerk reactions.
China also only looks rich if you live in a coastal region such as Shenzhen or Shanghai. Or a nice port city up one of the larger rivers. They knocked some buildings down near my home to put in a new road. People came along and they took the bricks, knocked the mortar off and then took them away to be reused elsewhere. There was a lady who used to go through my garbage looking for plastic and cardboard to recycle. And there were people who couldn't afford to wash their clothes in hot water, so they got frostbite in the winter from had washing them in cold water.
Buying overseas debt helps to stop this. The government is spending the tax money form the rich to buy foreign debt, which is keeping foreign countries buying Chinese goods, which are made by the Chinese poor. Without this the poor would be even worse off than they are.
There will be no WW3, because if somebody tries to start one with China, China will sell their debts on the open market and destroy them without ever needing to use a weapon of war.
This is true power. The power to stop wars by holding people's economies to ransom if they try to attack you. China will keep the peace without needing any soldiers.
My life and experiences in China.
· 9 years ago