China's Threat to the Us Economy

Topics: United States public debt, Economy of the United States, United States Pages: 3 (1044 words) Published: April 2, 2011
China’s Threat to the United States Economy

For the last twenty eight years, China has been quickly growing into one of the largest economies in the world. China has accomplished this feat, in part, by radically changing their policies on trade and free market interactions with other countries. During this process, China has bought approximately one hundred trillion dollars of United States debt in the form of Treasury bills, notes, bonds, and Inflation Protected Securities (Amadeo). This debt has given China leverage against the United States which has enabled China to keep the value of the United States dollar high, while keeping the value of the Chinese yuan low. As the inflation of the dollar continues to negatively affect the United States economy, China has become an economic superpower. Recently, concern has risen that China is a threat to the economy of the United States. China has become a perceived threat to the United States economy because of the increasing trade deficit between the two countries, the ability to undercut production costs of similar products produced in the United States, and the amount of leverage that China has over the United States due to the amount of money that has been lent by the Communist nation.

Trade deficits between countries are caused when a country imports more goods from one country than they export to that same country. In the case of the United States and China, there is approximately a two hundred and twenty five billion dollar trade deficit (Prassad). The United States imports nearly three hundred and thirty five billion dollars worth of goods and services from China, while exporting only a little more than eighty billion dollars worth of goods and services to the growing economic power (CRS). The disparity in trade between the two countries results in a flooding of Chinese made products that force their United States competitors to lower production costs. In many cases, lowering production cost of domestic...

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Elwell, Craig K. and Labonte, Marc. "CRS Report for Congress." Is China A Threat to the U.S. Economy? 23 Jan. 2007. Web. 17 Mar. 2011. <http://www.fas.org/sgp/crs/row/RL33604.pdf>.
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