View Single Post
Old 08-06-2010, 05:55 PM  
dyna mo
The People's Post
 
dyna mo's Avatar
 
Industry Role:
Join Date: Dec 2008
Location: invisible 7-11
Posts: 64,733
here's a better explanation than mine-

"Over the past two decades, the United States and China have developed a special relationship based on the safety of U.S. debt. In essence, the United States gives China access to the wealthiest consumer market in the world, which in turn soaks up China’s massive output of consumer goods. This not only provides income for Chinese exporters, but also helps ensure social stability in China by providing employment — which is Beijing’s primary economic policy goal. China in turn invests its large trade surpluses, earned in U.S. dollars, into U.S. Treasury debt (e.g., 30-year bonds or 10-year notes). This allows China to store its earnings in one of the largest and most liquid financial markets in the world, without needing to convert between currencies. Meanwhile, the recycling of surpluses into Treasury instruments helps to bankroll continued U.S. spending. It is vendor financing on a global scale."
dyna mo is offline   Share thread on Digg Share thread on Twitter Share thread on Reddit Share thread on Facebook Reply With Quote