Vice President Joe Biden told university students, on his fifth day during a visit in Chengdu in southwest China, that Chinese investments are safe.
“Please understand that no-one cares more about this than we do since Americans own 87% of all our financial assets. We have an overarching interest in protecting the investment, while the United States has never defaulted and never will default,” Biden said in remarks to the audience.
China buys more U.S. debt that another nation, with over $1.1 trillion currently, and was visibly nervous over the Congressional gridlock on Capitol Hill with the debt ceiling. However, despite China’s worried tones, can they abruptly stop buying U.S. Bonds and debt?
Most analysts say no. The reason why is that China is leveraged with the U.S., and breaking away would cause economic hardship in China, and thanks to the European debt debacle, there is no other sufficiently stable currency to invest in.
But American companies and individuals still hold the overwhelming majority of our own debt, backed by Fannie Mae and Freddie Mac, AIG, and others.