The US national debt has exceeded $34 trillion, and Treasury Secretary Yellen intends to visit China for the second time. What conditions has China offered? Will China help the US debt crisis?
According to data released by the U.S. Treasury Department, the total U.S. national debt has now exceeded the $34 trillion mark for the first time, setting a new record.
As early as September 2023, the size of the U.S. debt has exceeded $33 trillion, and in just three and a half months, the U.S. national debt has increased by another $1 trillion, which translates to an increase of $9 billion in liabilities for the U.S. federal government every day.
Behind the soaring US debt is a vicious circle of the US economy.
First, because the U.S. Treasury debt is so large, it costs about one-third of the fiscal revenue to pay interest alone. Some experts have criticized that the current financial policy has brought the US economy into a "dead end."
Russian presidential press secretary Dmitry Peskov made the analogy that Washington needs to repay about $200 million per hour on average with interest, and the United States will soon run out of paper to print money to pay off its debts.
Second, the U.S. government's high spending budget leaves no room for U.S. debt to fall.
Just a few days ago, Biden signed the 2024 defense budget bill, and the Pentagon received another $886 billion budget, and the United States still maintains the world's largest defense budget spending, and more than the top 10 other 9 countries in the world military spending combined.
Of course, there is also a large amount of social welfare spending, which also overwhelms the US treasury. During the pandemic, for example, the U.S. government introduced massive fiscal stimulus, including direct aid to individuals and businesses, as well as other relief programs, which further pushed up the national debt.
In addition, U.S. economic policy is fighting fires with salaries, and there is no way back.
The long-standing foreign trade deficit and the "debt cycle" system created by the massive issuance of debt by the United States, and now the debt ceiling has been lifted, leading the economy into a vicious circle.
Don't forget that the Fed has raised interest rates continuously since March 2022, and has raised interest rates 11 times in just two years, with a cumulative rate hike of up to 525 basis points, which has stimulated the return of the dollar, but has increased the burden on the government.
At a time when the United States is heavily indebted, Treasury Secretary Janet Yellen plans to visit China again. Yellen is trying to maintain communication with Beijing in a number of key areas at a time of tension between China and the United States, and deepen mutual trust and cooperation between the two sides.
On the eve of the APEC meeting in San Francisco last year, Yellen held a press conference on the outcome of the China-US economic and trade consultations, and I was there at the time. Yellen told reporters at the scene that she will visit China for the second time in 2024 as Treasury secretary, which is part of the Biden administration's efforts to maintain clear communication with Beijing on key issues such as economy and trade, investment, industrial subsidies and national security. Singapore's Lianhe Zaobao also reported that while attending the 50th anniversary celebration of the U.S.-China Business Council, Yellen mentioned that it is important to maintain contact with China, which can help avoid a series of potential crises in fields ranging from diplomacy to finance.
However, Yellen also stressed that the United States will continue to implement export controls and investment restrictions on China, and the United States does not seek to resolve all differences, and the goal is to prevent misunderstandings and miscalculations between the two sides from escalating the situation by maintaining communication.
In addition, Yellen said it would be important for U.S. policymakers to know how China intends to respond to the challenges of local government debt and the housing market, or its strategy in the event of unexpected economic weakness.
At the meeting, Chinese Ambassador to the United States Xie Feng said that China will unswervingly promote high-quality development, promote high-level opening-up, create a market-oriented, law-based and international business environment, and strengthen China-US trade cooperation has great potential.
The Chinese Foreign Ministry later responded that China has always believed that the development of healthy and stable economic and trade relations is beneficial to China and the United States and even the whole world. China is ready to work with the US side to uphold the principles of mutual respect, peaceful coexistence and win-win cooperation, implement the consensus reached at the China-US summit in San Francisco, and jointly promote the sound and steady development of bilateral economic and trade relations.
However, Foreign Ministry spokesperson Mao Ning also stressed that we hope that the US side will match its words with deeds and not reaffirm cooperation while constantly waving the "big stick" of sanctions against China.
Matching words with deeds is a prerequisite for China-US economic and trade cooperation, that is, when all sincere dialogues are opened, both sides must express goodwill and sincerity for cooperation, so that China-US relations can be stable and long-term, and China-US economic and trade cooperation can be deepened, which will also play a vital role in alleviating the US debt crisis.
For the U.S. economy, it has now reached a crossroads, with a total national debt of more than $34 trillion, which is quite more than 120% of U.S. GDP, and even if each American household contributes $1,000 per month, it will have to be repaid for 22 years, which has caused enormous pressure on the U.S. economy and society.
Including the Federal Reserve and some international institutions, the US economic growth may slow in the new year, and the economic growth rate is expected to reach only 1.5%. Since the U.S. dollar is the world's number one reserve currency, excessive U.S. borrowing could hurt the global economy. U.S. Treasury Secretary Janet Yellen has warned that if the U.S. defaults on its debts, it will have serious consequences, and the U.S. and world economies will be hit hard. At this time, the United States needs to stabilize its relations with China, especially in the economic and trade fields.
The U.S. government has been seeking dialogue with China for a long time. But even after the high-level meeting between China and the United States in San Francisco, US sanctions have not improved much. Therefore, how to implement the consensus reached during the high-level meeting between the two sides in San Francisco has a direct bearing on whether Yellen's visit to China can produce substantive results.