China’s Threat to the United States Economy

For the last twenty eight years, chinaware 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 affair and free market interactions with other countries. During this process, chinaware has bought somewhat one hundred trillion dollars of joined States debt in the form of treasury bills, notes, bonds, and Inflation Protected Securities (Amadeo). This debt has given mainland China leverage against the fall in States which has enabled China to keep the value of the get together States dollar high, while keeping the value of the Chinese yuan low.As the inflation of the dollar continues to negatively affect the coupled States economy, China has become an economical superpower. Recently, concern has lift that China is a curse to the economy of the United States. China has become a perceived threat to the United States economy be suit of the increasing trade deficit between the 2 countries, the ability to combat zone intersection bes of similar products assignd in the United States, and the center of leverage that China has over the United States ascribable to the amount of money that has been lent by the Communist nation.Trade deficits between countries are caused when a clownish 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 tether 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 comprises. In many cases, lowering production cost of dome stic products results in either the closing of these businesses or the outsourcing of jobs. Both of these cause the loss of jobs in the United States. One of the reasons that the United States has been unable to lessen the trade deficit is Chinas ability to undercut production costs of similar products made in the United States (Elwell 27) Chinas overall cost of living is much lower than their United States counterparts (Amadeo).Therefore, they are able to produce goods and hire labor at a much lower price. One of the main reasons for this economic statistic is Chinas population. It is nearly three times that of the United States, giving China a much larger work force to produce electronics, automobiles, and clothing at a fraction of the United States production cost (CIA). Not only does this negatively affect employment in the United States, but it also impingements their ability to compete on the world(a) market.Industries that involve manufacturing, such as automobiles, computer s, and electronics have decreased by thirty four percent since 1998 (Prasad). This has a negative effect on the amount of goods that the United States can export. Finally, China has gained a certain amount of leverage affecting the United States economic policies, due in part, to the amount of money that China has loaned the United States. Starting in the early 1980s, every time the value of the dollar would drop, China would buy Treasury bills, notes, bonds, and Inflation Protected Securities to keep the dollar stable in value (Elwell 36).After nearly thirty years of this practice, the United States has come to depend on Chinese loans to maintain its currency value and China has come to own a majority of United States debt. This imbalance of debt has created a number of different scenarios that could take on about potential political and economic problems for the United States. China could theoretically cash in their treasuries and bonds tomorrow, which would cause the United Stat es dollar to suffer massive inflation. While this scenario is not necessarily in Chinas best interest right now, the possibility should concern the United States government.Instead, China could use their debt leverage to impact foreign trade policies and more importantly domestic political policies that budget how the United States spends its tax dollars (Elwell 22). China has become a perceived threat to the U. S. economy because of the increasing trade deficit between the two countries, their 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 amount of money that has been lent by China.Although the United States has taken step to close the trade deficit, such as convincing China to raise prices on their exports, there is assuage a considerable gap (Prasad). The United States government continues to print money that they simply cant afford, therefore, relying even more hea vily on China sustaining the value of their currency. Unless the United States is able to close the trade deficit and regain control of our economic flexibility, the problems caused by foreign countries owning our debt will remain eminent.