At the end of January 2019, the total actively traded U.S. debt is $16T. According to the table, approximately what percent of U.S. debt does China own at this time?
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The correct answer and explanation is :
To determine what percent of U.S. debt China owns at the end of January 2019, we would need the specific data from the table showing the amount of U.S. debt owned by China. However, I can guide you through how to calculate the percentage if that information is provided.
Let’s assume that, based on the table, China owns \$1.1 trillion of U.S. debt (which is a typical value around that time).
Formula:
To calculate the percentage of U.S. debt that China owns, use the following formula:
$$
\text{Percentage Owned by China} = \left( \frac{\text{Amount of U.S. Debt Owned by China}}{\text{Total Actively Traded U.S. Debt}} \right) \times 100
$$
Step-by-Step Calculation:
- Amount of U.S. Debt Owned by China: \$1.1 trillion
- Total U.S. Debt: \$16 trillion
- Plugging these values into the formula:
$$
\text{Percentage Owned by China} = \left( \frac{1.1 \text{ trillion}}{16 \text{ trillion}} \right) \times 100 = 6.875\%
$$
Explanation:
In this example, China owns approximately 6.88% of the total actively traded U.S. debt as of January 2019.
This percentage is significant because the U.S. government borrows money by issuing Treasury securities, and foreign governments, such as China, purchase a substantial amount of these securities. The reason why China holds such a large portion of U.S. debt is due to its economic relationship with the United States, particularly the trade imbalance. China exports a large amount of goods to the U.S., resulting in a surplus of U.S. dollars. Instead of keeping these dollars in cash, China invests them in U.S. Treasury securities as a relatively safe investment.
The ownership of such a large portion of U.S. debt by China has both economic and geopolitical implications. For instance, China’s ability to influence U.S. financial markets and potentially even its policy decisions can be substantial, especially if the U.S. were to face a financial crisis. However, China’s holdings are also an indication of its own economic stability and its desire to maintain a stable relationship with the U.S.