L1-China&39;s Economic Conditions(16)

factor in world oil markets.”10 China has also reportedly become the largest consumer ofsteel, cement, and copper.

Some U.S. policymakers have expressed concern over China’s rising ownership of U.S.government debt, due to fears that China might attempt to use its holdings as leverage in itsdealings with the United States on economic and/or political matters. China is the secondlargest foreign holder of Treasury securities (after Japan), and both the level of thoseholdings and China’s share of total foreign holdings have increased sharply over the past fewyears. These went from $51.8 billion in 1999 to $252.2 billion as of September 2005.China’s U.S. Treasury securities holdings as a share of total foreign holdings over this periodhave grown from 4.1% to 12.1%. China’s Treasury securities holdings as a percent of totalprivately held U.S. Treasury securities rose from 1.6% to 6.4%. Some have raised concernsthat threats by China to halt future purchases, or to sell existing holdings, could cause thevalue of the dollar to depreciate in world markets (raising import prices), increase U.S.interest rates, lead to a decline in U.S. stock and bond markets, and possibly cause the U.S.economy to slow. However, any such disruption to the U.S. economy would also hurtChina’s economy since about a third of China’s exports go to the United States.

10

U.S. Energy Information Administration website at [http://www.eia.doe.gov/].