Number: RL34314
Title: China's Holdings of U.S. Securities: Implications for the U.S. Economy
Authors: Wayne M. Morrison, Specialist in Asian Trade and Finance; Marc Labonte, Specialist in Macroeconomic Policy 
Abstract: This report examines the importance to the U.S. economy of China's investment in U.S. securities, as well as U.S. concerns over the possibility that China might unload a large share of those holdings, the likelihood that this would occur, and the potential implications such action could have for the U.S. economy. The report concludes that a large sell-off of Chinese Treasury securities holdings could negatively affect the U.S. economy, at least in the short-run. As a result, such a move could diminish U.S. demand for Chinese products and thus could lower China's economic growth as well. The issue of China's large holdings of U.S. securities is part of a broader question that has been raised by many economists: What are the implications of the heavy U.S. reliance on foreign investment to maintain healthy economic growth and to finance the budget deficit?
Pages: 12
Date: January 13, 2009