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China holds only 9% of US sovereign debt contrary to misperceptions; China's export surge is also subject to misinterpretation
By Michael Hennigan, Founder and Editor of Finfacts
Nov 2, 2010 - 4:40:22 AM
Li Changchun (r), a member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China, attends a breakfast meeting with Irish Enterprise, Trade and Innovation Minister Batt O'Keeffe in Dublin, Sept. 27, 2010.
China holds only 9% of US sovereign debt contrary to misperceptions; China's
export surge is also subject to misinterpretation
China holds only 9% of US sovereign debt contrary to misperceptions and scare
scenarios that the US risks being beholden to the reemerging Asian giant (see
CNBC video clip below). The story of the exports surge is also not what it may
seem to those who go with the flow of conventional wisdom.
Apparent facts become the received wisdom through repetition despite not
being true and commentators repeat them because it's easier than verifying
The Japanese are big savers, which they are not. The data will show they were
in 1990 but that is history. Germans are often referred to as saver outliers in
Europe but why did Italy survive the financial crisis relatively unscathed,
despite its high public debt?
It is also common to use a foreign comparison to support an argument. The
facts can be true but not relevant. More common is to use selective facts or
examples as a domestic audience would not likely know what is true or not.
China also holds about $376.3bn of the bonds issued by
guaranteed by United States government, such as federal mortgage
guarantors Fannie Mae and
Freddie Mac, which account for almost 7% of the total bonds issued by the
In early September, the European Chamber of Commerce
a report that China relies
on compulsory certification schemes to regulate its large and
growing market. Such practice unduly restricts access to the
Chinese market for European companies in a range of key
industries such as the automotive, auto component, IT and
telecommunication equipment, healthcare equipment,
electro-technical and power transmission industries. In the
service sector, licensing requirements continue to exclude
foreign companies from entire sectors. Nearly ten years after
China’s WTO accession, and despite clear commitments to increase
competition in service sectors, European companies are still
denied fair market access to several of them, the chamber said.
Days later, Chinese vice president Xi Jinping, who is expected to become president in
a speech in Xiamen in southeast China's Fujian Province, that the sustained
and fast development the Xiamen special economic zone has achieved since its
establishment 30 years before, proves that developing an open economy is the
right thing to do and illustrates the importance of attracting foreign
investment and conducting mutually beneficial cooperation.
Xi said in 2009, China attracted a total of US$90bn in foreign investment,
ranking it the second in the world. In the first half of this year, China
approved 12,000 new foreign-invested enterprises with a paid-in investment of
US$51.4bn, up by 19% and 21% year-on-year respectively. Also in 2009, domestic
investors from China made direct investment in 111 countries and regions, and
China's outward direct investment in non-financial sectors totaled US$17.8bn,
which represents a 44% year-on-year increase.
He said by July 2010, a total of 698,000 foreign-invested enterprises had
been established in China, registering a paid-in capital of US$1.05trn. These
enterprises account for 22% of tax revenues, 28% of added industrial value, 55%
of foreign trade, 50% of technology imports and some 45m jobs.
Discussing the risks of borrowing from China, with Tom Schatz, Citzens Against Government Waste, and Keith Boykin, The Daily Voice:
Exports account for over 40% of GDP (gross domestic product) in China and
Germany; 12% in the US and 18% in Japan.
However, in common with Ireland, China has a dual trading system with foreign
enterprises responsible for more than half its exports and this rises to over
80% in the consumer electronics area.