International Law

China as Financial Bogeyman

By Stan

"You can’t do that for free," he says, referring to healthcare and other programs, "and you can’t take out a credit card from the Bank of China in the name of our children and our grandchildren," he says, referring to McCain’s plans.

This is Obama speaking (h/t Politico), trying to use China (again) as a bogeyman. I’m not a big fan of U.S. deficits, or the size of the national debt, but this comment is a bit misleading.

For the record, foreign ownership of the U.S. national debt is about 25%, with roughly 50% in the hands of the U.S. government itself. Of that 25% foreign ownership, China holds about 23% (this is my calculation, which is probably off a bit since I was using two different sources - sorry about that) and Japan holds over 27%. Here are the Treasury numbers up to February.

Admittedly, China’s holdings of U.S. government debt has increased rapidly over the past couple of years, and Japan’s has actually decreased recently. But China is not number one. And anyway, a quarter of a quarter of the national debt? Is this something to panic about?

So why do politicians - including McCain, Clinton & Obama - use China instead of Japan when discussing this issue? Once again, China is being put forward as the bad, scary foreign power. Americans should be frightened that China has so much U.S. debt, as opposed to that held by oil exporters, Japanese, etc.

Yes, yes, I have been writing way too much about the demonization of China recently, but with all the crazy rhetoric flying out there, why not?

Full post as published by China Hearsay on April 17, 2008 (boomark / email).