Financing of the United States Stimulus Package with Chinese investment in US Treasuries

In an attempt to the financing of the stimulus package and support for the economy, it is the United States pressure on China to buy Treasury securities during these tough economic times.

With China sitting on a growing mountain of foreign exchange reserves which no one can miss the significance of the Minister for Foreign Affairs of the United States, Hilary Clinton decides to China the center piece of her four nation tour of Asia. her first trip as America's top diplomat. While her tour took her also Japan, South Korea and Indonesia, the focus was clear about the economic relations between the United States and China.

In the midst of the Assembly of the fear that Washington can struggle to finance the bank bail-outs and ballooning deficits over the next two years, her goal was to persuade China to continue to invest in the foreign exchange reserves US Treasury securities. This to help finance the bailout of failing u.s. banks and pay for the $ 787 billion stimulus package.

The Ministry of Finance has indicated that it almost $ 500 billion in the first quarter of this year alone.

In its statement on Chinese television "the Chinese know that in order to start again to export to the largest market, the United States, the United States has a drastic measures with the stimulus package.We need more debt. "

She also said, "we're really going to rise or fall together. By continuing to support the instruments of the u.s. Treasury, recognize the Chinese our interconnections".

She offered to Beijing full guarantees that the administration of Obama is planning to restore sound conditions on the health of the u.s. public accounts and the interests of the holders of bonds, once the economy starts to improve.

China has already $ 700 billion worth of U.S. Treasury securities. Critics fear that they can influence as hostility between the two countries, in particular on issues of interest is created when human rights, Tibet and climate change.

China entered in the current global economic crisis with enough savings, but also with a number of important economic weakness. unequal exchange rate has encouraged over investment in the export sector and as a result of the vulnerable to the slumping economy in the world.

Although the u.s. Treasury bonds are considered to be relatively safe and stable in value relative to other financial instruments, the rise in the debt from the Treasury by the Chinese concerns that the country constantly pile of these effects would lead to investment losses in the future as prices tumble activated. China's holdings of treasuries, accounting for more than 45% of its foreign exchange reserves that could be dangerous.

Some critics claim that China must diversify its foreign currency reserves. with the holding of these bonds will be shown on the risk of a drop in prices such as the United States giving more of stimulating the economy. China are abundant currency reserves to buy raw materials use and energy-related products that would help support economic growth.