China and Japan have the largest investment in US government bonds
According to a CNN report, in the year 2000, China accelerated the process of buying US government bonds. This was the period when the US recognized China’s entry into the WTO. Due to this, exports from China increased and a huge amount of dollars started coming into the country. It felt the need to invest in the right places. US Treasury bonds are considered the safest in the world and China’s holdings in them reached $1.3 trillion in 2013. For nearly a decade, China remained the largest foreign creditor to the US. But after deepening tensions between the Trump government and China in 2019, China reduced its investment in US government bonds and was replaced by Japan.
How much is China-US investment
The situation today is that Japan’s investment in US government bonds is $1.1 trillion, while China’s is $870 billion. That is, if America defaults, then both of them can get a big blow. US defaulting can cause a fall in the value of its government bonds. This will also reduce the foreign reserves of Japan and China. That means they will have less money to pay for essential imports and foreign debt. Due to America’s default, the economy there can get stuck in recession. If this happens, its effect can be seen on the whole world.