As we all know, the United States is the world's largest debtor, according to the latest data from the U.S. Treasury Department, as of now, the balance of U.S. debt has exceeded 34.5 trillion U.S. dollars, of which 8 trillion U.S. debt is held by overseas countries, accounting for about 23% of the total U.S. federal government debt.
The top three creditors of the United States are Japan, China and the United Kingdom, and as China has been reducing its holdings of U.S. bonds in the past year and the United Kingdom is increasing its holdings of U.S. bonds, the gap between China and the United Kingdom has narrowed to $60.5 billion, and the second and third places may be swapped in the near future. Japan's position as the largest creditor of the United States may be difficult to surpass in the short term.
The largest overseas creditor of the United States is Japan, which currently holds $1,150.3 billion in U.S. Treasury bonds, so which countries owe China the most? Let's take stock.
The chart below, based on data provided by the World Bank, counts the 20 countries with the most debt to China among the countries in the world as of the end of 2022.
The first is our old iron Pakistan, which owes a total of $26.6 billion to the mainland.
I have always said that there is no pure friendship between countries, and interests have always been one of the most important ties that maintain relations between the two countries. China has been really good to Pakistan, not only aiding construction, teaching technology, and helping to build industries, but also directly lending real money to Pakistan through various channels to develop infrastructure construction and meet the needs of international trade.
Pakistan is followed by Angola, which owes us $21 billion. With a population of more than 35 million, Angola is not a small country in Africa, and China has also contributed both money and effort. I have a classmate who works in a design institute and was sent to Africa a few years ago to help build in Angola.
China has lent more than $20 billion to Pakistan and Angola each, much more than the countries that come next in line.
Sri Lanka, Ethiopia, Kenya, Zambia, Bangladesh, Laos, and Egypt all have between $5 billion and $9 billion in debt to China. The next dozen countries owe China between $3 billion and $4.3 billion, while Argentina, which ranks 20th, owes $2.9 billion.
It is worth noting that many of China's top 20 debtors also owe the most to the IMF.
Seeing this, do you have such a question, why do we lend so much money to the "poor" countries of Asia, Africa and Latin America? There are three main reasons.
First, it is necessary to safeguard the political status of a major power.
What is the difference between a large and a small country? In addition to population and economic size, the most important thing is the international political status.
As the P5 and the second highest country in the world in terms of total GDP, China should undertake more obligations to help poorer and backwarder countries develop than us, otherwise Western countries will seize the handle and conclude that we are incompatible with the status of a great power, and even the status of the P5 will be questioned.
Second, we need to improve the utilization rate of foreign exchange reserves.
China has $3.2 trillion in foreign exchange reserves, of which more than $700 billion are U.S. bonds, which shows that we have the need to manage and invest foreign exchange reserves.
Many people on the Internet think that it is not good to lend money to the United States, so we will lend it to other countries. External loans are not free to lend to others, they have interest, and when they are due, they must not only repay the principal but also pay the corresponding benefits.
We've all heard the saying, "Don't put all your eggs in one basket," which means diversifying your investments to diversify your risk. In addition to buying U.S. bonds (lending money to the U.S.), diversify foreign exchange reserves and improve interest rate efficiency, rather than letting money "sleep" on bank accounts in vain.
Third, promote the process of RMB internationalization.
At present, the US dollar is not only the main currency of international trade settlement, but also the main currency of cross-border investment and financing. In order to achieve greater development in the internationalization of the renminbi, in addition to winning more trade settlement shares from the US dollar and the euro, it must also make a difference in the field of international finance.
Lending money to countries that need it can help make progress in the area of investment and financing. We can make a rule with the debtor country that we can borrow money, accept RMB loans in addition to dollars and euros, and ask the other party to use RMB when repaying debts.
Allowing more renminbi to circulate in the international financial market is the only way to compete with the euro or even the dollar in the future.
Of course, while reaching loan agreements with other countries, it is also necessary to manage debt repayment, so that the money lent out cannot be easily wasted, and even if part of the borrowing eventually becomes aid, it is necessary to obtain partial ownership of ports and roads from these countries.
It is equivalent to a change in the form of assets, from working capital to fixed assets.