WASHINGTON—The Chinese government has reached out to the Obama administration with a proposal to buy the country’s debt of more than $17 trillion if the government would take about $5 trillion for it.
“We are offering the U.S. government an opportunity to get our from under its heavy debt load, restructure its finances, and move on to a new period of prosperity,” said China’s Minister of Finance Lou Jiwei. “We say at the outset that we cannot offer less than this discount of 70 percent, because the American government has threatened to default several times in the last three years.”
Lou said the Chinese government would also require that all American companies doing business in China work in partnership with Chinese companies, which would include the sharing of proprietary trade and technological intelligence. “Of course, the prohibition on Chinese companies sharing trade and technological intelligence with American partners would remain in place, as it must,” said Lou.
U.S. Treasury Secretary James Lew said he is looking closely at the offer, but unless the Chinese sweeten the deal, the proposal will likely go nowhere. “We certainly want to rid ourselves of this debt, and if the Chinese people want to buy it, that’s great,” Lew said in a statement. “But 30 cents on the dollar is surely a non-starter. Yes, the U.S. government has a lot of debt, and yes, it’s a headache getting the debt ceiling raised every six months to pay our bills. But the United States remains the world’s largest economy, the dollar remains the world’s reserve currency, and our companies are producing more goods and services today than ever before. To sell our debt at such a steep discount, particularly when the Chinese government is tying technology transfer to it, is a no-go, I can tell you right now.”
Lou Jiwei said President Xi Jinping is studying Lew’s initial response. “We are listening carefully to the Administration’s concerns and we are eager to discuss them in more detail,” he said. “President Xi has contacted President Obama with an offer to meet on the deal, and we await the President’s response.”
Should China buy the debt, among the obligations it would assume are $42 billion in Treasury Notes to pay for food stamps for America’s poor, $143 billion for 425 F-15 advanced fighter jets, and $43 billion for two Nimitz-class aircraft carriers that are deployed in the Persian Gulf, protecting international sea lanes. One of the vessels needs a new navigation system.
Lou says the Chinese government is a little concerned about a $3 billion debt for 600 million pairs of military shoe strings, which Chinese auditors say is an indication of “gross mismanagement,” since the U.S. government could have gotten the same number of shoe strings for less than $2.5 billion from Chinese manufacturers. “What does this say about U.S. financial management practices?” Lou asked.
Even so, Lou said, “there’s a lot to like in this debt. And we have ways to ensure full payment is made. So, our message to the Administration is, there’s a $5 trillion check waiting for you as soon as tomorrow. We can even deposit it directly into your account. We hope you see the advantage of a debt-free tomorrow.”
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