“China has an export-dominated economy—perhaps as much as 38 percent of its gross domestic product is attributable to the sale of goods to foreign markets. The country exports to many nations, but there is one market on which it is particularly dependent. In 2007, 97.7 percent of China’s overall trade surplus related to sales to the United States, and in 2008 the figure was 90 percent. In short, China runs a trade deficit with the rest of the world, buying raw materials and components, and a surplus against the United States, selling finished goods. Beijing, therefore, is locked into buying Treasuries and will remain so until Chinese manufacturers either find new foreign markets—something they are only having moderate success in doing—or they can sell to Chinese consumers. And consumption growth, despite rosy government statistics, appears to be anemic.”
