As one of the largest holders of U.S. debt for the last two decades, China has not shied away from lecturing the United States about its financial behavior.
Like a parent scolding a child for racking up credit card bills, China needled Washington to protect its assets during the 2013 debt ceiling impasse and blamed Americans for setting off the 2008 global financial crisis with their profligate spending.
But as American lawmakers debated, and ultimately passed, a giant domestic bill championed by President Trump that is projected to add more than $3 trillion to the federal debt by 2034, China has remained largely silent despite the potential long-term risk it poses to its holdings.
China’s main concerns about its holdings has long been over the dollar’s value and whether the United States will fail to pay its obligations, said Yasheng Huang, an economist at the Massachusetts Institute of Technology.
“These two concerns are far more material today,” he said. “The dollar has already depreciated, dragging down the Chinese holdings. In terms of the other concern, I personally do not trust this administration to uphold rule of law and debt obligations.”
In covering the debate, Chinese state media have emphasized how divisive the bill has been and the seeming futility of the American democratic process to reflect popular will. Reports described the debates as a “political circus,” while Chinese pundits said the vote highlighted “increasing polarization” in the United States.
But Chinese officials have not yet publicly criticized the Trump administration and could be focused on other considerations.
Averting a Trade War Is a Priority
China probably sees no reason to antagonize Mr. Trump by publicly criticizing his bill when it is in a shaky truce with his administration in a trade war that had earlier seen both sides impose sky-high tariffs on each other’s goods.
The two sides have agreed to lift certain countermeasures, and keep working toward a deal. Momentum may even be building toward a meeting between Mr. Trump and China’s top leader, Xi Jinping.
Beijing, which is trying to revive economic growth, can ill afford an extended trade war. Concerns over its treasury holdings are not top of mind. More pressing are the tariffs and efforts by the Trump administration to persuade other countries to restrict their own trade with China.
“China is still trying to maintain a fragile trade truce with the United States,” said Joe Mazur, an analyst at Trivium, a research firm. “Criticizing Trump’s signature piece of legislation could anger him and torpedo recent diplomatic understandings.”
Why Interrupt Your Enemy’s Mistake?
From China’s perspective, rather than fuel American economic growth, the measure could push Washington closer to a fiscal cliff and undermine its ability to compete with Beijing.
“The chances of Trump’s success are at best uncertain,” said Shen Dingli, a scholar of international relations in Shanghai. Instead, the measure “could indirectly help make China great again” by weakening the United States, he said.
Crises and chaos in the United States feed into one of Mr. Xi’s primary assertions about the state of the world, that the East is rising and the West is declining. China has highlighted the Trump administration’s alienation of U.S. allies and partners and disregard for global norms.
On social media, one popular hashtag read: “Big, Beautiful Bill will make 17 million people lose their health insurance.” Internet commenters also cheered on Elon Musk, who has described the bill as “insane.”
In contrast, Chinese analysts said, China has raised its debt levels, in part, to build infrastructure and to loan money to developing countries — spending that is geared toward expanding China’s influence.
China is also struggling with a growing mountain of debt because of borrowing by local governments, their investment vehicles and real estate developers.
Yao Yang, an economist at Peking University, was skeptical that China stood to gain from any disruption caused by Mr. Trump’s bill. He said the United States could continue to borrow for years to come as long as it remained the world’s biggest consumer market.
“America’s financial dominance can’t be easily overturned, and the same goes for the dollar’s supremacy,” he said.
China Is Less Exposed to U.S. Debt
Beijing has long complained that Washington has printed more money to serve its domestic needs without considering how it devalues the dollar, and, by extension, foreign countries’ holdings of U.S. assets.
But it has also been gradually reducing its holdings of U.S. Treasury bonds, from a peak of $1.3 trillion more than a decade ago, to about $750 billion now, investing instead in other assets like gold.
China is also invested in weakening what it calls the U.S. dollar’s hegemony as the world’s leading currency for trade.
That power fuels the world’s dependency on American consumers, making major exporting nations like China “more submissive” to the United States because of the threats of tariffs, said Henry Huiyao Wang, president of the Center for China and Globalization in Beijing.
“The United States is using the greenback and its large deficit financing to sustain its global power,” he said.
David Pierson covers Chinese foreign policy and China’s economic and cultural engagement with the world. He has been a journalist for more than two decades.
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