China Defaults on Trillion Debt to US Bondholders, But Will Biden Demand Pay Up?
All countries must pay their share — especially when it comes to debts. Yet, China seems to believe it is exempt from this rule.
According to The Hill, the U.S. currently owes China $850 billion and is making interest payments on this hefty sum.
However, China is currently in debt to bond holders in the United States and has now defaulted on its debt. But that hasn’t stopped China from continuing trade with the U.S. in a business-as-usual fashion.
The question now is: Will President Biden demand the Chinese to pay?
1—China is in default on a trillion $$ in debt 2 US bondholders. Will the US force repayment?—The Hill#WakeUpCongress
Every country should pay its #sovereigndebt .Default, we are told, is not an option.
But has anyone told #CCPChina ??
The United States… https://t.co/aJsbvLjueu— Dan DiMicco (@DanRDimicco) July 5, 2023
Past U.S. administrations have ignored China’s debts, allowing trade and business to continue with no consequences. But times have changed, and as the Hill noted, “the [U.S.] relationship with China has soured, and the People’s Republic of China has become the greatest adversarial threat to the U.S. and Western security.”
Today, we know China to be one of the biggest economies in the world. The Chinese market is so vast that American companies such as AMC, General Motors, Spotify, and Snapchat are all influenced by China.
As the Hill reported, China’s economic power is strong because before 1949, the Chinese government issued a large set of long-term sovereign gold bonds that were secured by Chinese investors in order to build infrastructure and finance governmental activities.
In 1938, during the Second Sino-Japanese war, China was essentially divided into three factions — Nationalist China under government control, Communist China, and other Japanese-occupied areas.
The Nationalists eventually defeated by the communists, making the People’s Republic of China the country’s official government.
Under international law, the “successor government,” currently the Chinese Communist Party, must pay for the defaulted bonds.
In 1987, then-U.K. Prime Minister Margaret Thatcher, often referred to as the “Iron Lady,” stepped up to the plate against China and negotiated an agreement to be signed, forcing China to pay its sovereign debt held by the British.
Will President Joe Biden take notes from Margaret Thatcher?
To this day, China has accessed U.S. capital markets while ignoring its sovereign debt to American bondholders.
Other countries have had to pay their debts. The German government made its last reparations payment for World War I in 2010. Great Britain made payments on bonds dating back to the 18th century in 2015. Why should China be any different?
The Biden administration has had a special opportunity to enforce the international rule that governments must honor their debts.
The U.S. must do what the U.K. did in 1987 and view the repayment of China’s sovereign debt as vital to its national security interests.
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