Patt Morrison

<em>Patt Morrison</em> is known for its innovative discussions of local politics and culture, as well as its presentation of the effects of national and world news on Southern California. Hosted by

Does China own too much U.S. debt?

by Patt Morrison

24011 full
China's Defence Minister Liang Guanglie (R) meets U.S. Secretary of Defense Robert Gates. Jason Reed-Pool/Getty Images

Our biggest creditor, China, holds at least $1.115 trillion in U.S. debt, and is a frequent presence at the Treasury’s weekly auctions, which sell between $13 billion and $35 billion of debt at each session. Reuters investigated the U.S. Department of the Treasury and found that a 2009 change in the procedure for debt auctions was made in response to suspicions that China was buying more debt than it reported. Officials were particularly worried when they discovered that Chinese entities were using “guaranteed bidding,” a method by which they arranged with dealers to place bids at auctions for them and then collected the bought debt afterward. This enabled China to remain anonymous in the transactions and to skirt the Treasury’s requirement that no single bidder purchase more than 35% of the bonds at a given auction. Worried that China had acquired a controlling interest multiple times, the Treasury accordingly changed its policy to exclude guaranteed bidding, though it publicly attributed the change to “technical modernization.” Was the Treasury aware that China was buying more debt than allowed? And if so, how long did they know it before they changed the rules? What economic impact, if any, could result from China's owning so much of U.S debt?


Emily Flitter, reporter, Reuters

Joseph Gagnon, senior fellow, Peterson Institute for International Economics

blog comments powered by Disqus

Enjoy Patt Morrison? Try KPCC’s other programs.

What's popular now on KPCC