As one of the largest holders of U.S. debt for the past two decades, China has historically criticized the United States regarding its financial practices. For instance, during the 2013 debt ceiling impasse, China urged Washington to safeguard its assets and attributed the 2008 global financial crisis to American consumerism.
However, in light of the recent passing of a significant domestic bill under President Trump, projected to increase the federal debt by over $3 trillion by 2034, China has remained largely silent, despite the potential risks this poses to its financial interests.
Concerns about the value of the dollar and the U.S.'s ability to meet its financial obligations remain central to China's apprehensions, according to economist Yasheng Huang from the Massachusetts Institute of Technology. He noted that these concerns have intensified, as the dollar has depreciated, diminishing the value of Chinese holdings.
Chinese media coverage of the domestic bill's debate has criticized the American political process, describing it as a "political circus" and highlighting the growing polarization within the U.S. Despite this, Chinese officials have refrained from overtly criticizing the Trump administration, possibly to avoid jeopardizing ongoing trade negotiations.
Amidst efforts to de-escalate trade tensions, China appears to prioritize maintaining a fragile truce with the U.S., as the ongoing tariffs and trade restrictions continue to impact its economy. Analysts suggest that provoking the U.S. administration could weaken recent diplomatic efforts.
From China's perspective, the new legislation might not bolster American economic growth and could potentially increase U.S. fiscal instability, inadvertently benefiting China by diminishing U.S. competitiveness. Observers note that crises in the U.S. could support China's narrative of a shifting global balance of power.
Despite rising U.S. debt levels, economist Yao Yang from Peking University expressed doubt that China would significantly benefit from disruptions caused by U.S. legislation, asserting that America's consumer market ensures its financial strength is not easily undermined.
While Beijing has long criticized the U.S. for increasing its money supply without regard for its impact on foreign holders of U.S. assets, it is also gradually reducing its own holdings of U.S. Treasury bonds. Notably, these holdings have decreased from a peak of $1.3 trillion to approximately $750 billion as China diversifies its investments.
China is also working to diminish the dollar's dominance in global trade, which has historically positioned the U.S. as a central player in the global economy. This situation has led major exporting nations like China to feel vulnerable to U.S. economic policies, further complicating the international financial landscape.