China Finances 1/3 of US Deficit

Bush with a Chinese diplomant (prime minister?).

Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People’s Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

I don’t know how it works – how it’ll end up – or how to get of the situation – but I think this is supposed to be really bad. Especially if they move over to Euros. Any economists care to elucidate?

One thought on “China Finances 1/3 of US Deficit

  1. Beastmomma

    I am not 100% sure how this works either, but I do know that indicates the US is unable to be fully finacially independent. Also since there is a dependency on China that in negations about human rights violations or nuclear weapons the US will not come down as hard on China as it does on other countries that are not finacing the US defecit.

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