China as the world’s creditor and the United States as the world's debtor : implications for Sino-American relations

China is now the world’s leading creditor nation, while the United States is the world’s largest debtor. Beijing is the largest foreign holder of US government debt – passing Japan in 2008 to become, in effect, the US government’s largest foreign creditor. While some claim this gives Beijing unprecedented power over the United States, others claim that China’s power is in fact greatly circumscribed. This paper shows that although current patterns of economic interdependence between the two economies invariably pushes each towards cooperation, China is deeply concerned about the future trajectory of the US economy and is already engaged in loosening the bonds of interdependence. This has profound implications for Sino-US relations and the global economy.