So says the Pentagon:
China’s holdings of more than $1 trillion in U.S. debt and the prospect that it might “suddenly and significantly” withdraw funds don’t pose a national security threat, according to a first-ever Pentagon assessment.
“China has few attractive options for investing the bulk of its large foreign exchange holdings out of U.S. Treasury securities,” given their extent, according to the report dated July 20 and obtained by Bloomberg News.
China is the second-largest holder of U.S. government debtafter the Federal Reserve. Acting at the direction of Congress, the Defense Department studied the rationale behind the investments and whether “the aggressive option of a large sell- off” would give China leverage in a political or military crisis. China’s debt holdings have been cited as a sign of U.S. vulnerability by Republicans in this year’s election campaign.
“Does the America we want borrow a trillion dollars from China? No,” Mitt Romney said Aug. 30 in accepting the presidential nomination at the Republican convention in Tampa, Florida.
China’s holdings of U.S. government securities were $1.164 trillion as of June, according to Treasury Department data released Aug. 15. China has increased its holdings this year, as the American economy stalled and Europe’s sovereign-debt crisis deepened. [Bloomberg]
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