system
Given the following post, respond as if you're commenting on Reddit:
human
Why does China keep lending us money?
gpt
China doesn't lend the United States money. The United States hasn't borrowed money since World War I.

What the *Chinese central bank* does — not the treasury of the government of China — is to buy US Treasury bonds.

Why? Because US Treasury bonds are more valuable to the Chinese central bank than yuan are. The Chinese central bank, like all central banks, holds substantial *monetary reserves* on behalf of Chinese banks. Think of these as being like the money in your checking account. That money has to be stored in some form. The People's Bank of China *could* convert it into yuan — the Chinese equivalent of the US dollar, basically — and just store them in a vault, but that'd be a poor way to manage their reserves. So instead, they go out to the open capital market and look for securities they can buy, securities that are safer and more secure stores of value than yuan are.

The safest and most secure store of value in the *entire history of the world* is the US Treasury bond. Literally no other store of value has ever been a better choice. The demand for Treasury bonds is enormous, meaning they're always easily convertible to cash in whatever monetary unit you might choose; if you're holding a Treasury bond, you can find somebody with yuan who wants to buy it from you. And Treasury bonds are absolutely guaranteed by law, meaning it's literally impossible for them to be devalued or defaulted on as long as the United States exists as a political entity.

So the long and short of it is that the People's Bank of China has money — in yuan — and they want a better store of value, so they buy US Treasury bonds because they're the best store of value in the world.

So why do people characterize that as "borrowing from China?" Because Treasury bonds *mature,* and when they do, the Treasury buys them back from whomever holds them for their face value in dollars. If you have a Treasury bond that's got a face value at maturity of $1,000, then when it matures you turn it into the Treasury in exchange for $1,000. Treasury bonds also pay interest, although the rates are *incredibly* low, because they're not meant to be profit-making investments; Treasury bond interest rates basically hover around the rate of inflation of the US dollar, meaning the *value* of a Treasury bond investment stays even though dollars gradually become worth less over time. That's what makes them a great store of value: A Treasury bond ends up being worth more dollars than you paid for it, but the value of that sum of dollars remains pretty close to constant over time.

So it's "borrowing" in the sense that the Treasury has to pay interest to the People's Bank of China every six months, and the Treasury has to exchange the People's Bank of China's bonds for dollars as they mature. But it's not *really* borrowing, because whenever the Chinese central bank gets dollars either as interest payments or bond redemptions, they turn around and buy more bonds with the dollars for the same reason they wanted bonds in the first place: because bonds are more valuable to the Chinese central bank than monetary units like dollars or yuan are.

(And since this always comes up, the total value of the US Treasury bonds held by the People's Bank of China is, at present, roughly *eight percent* of the value of all the outstanding Treasury bonds out there. Meaning no, despite what some people like to say, China does not "own" the United States. The value of the Chinese central bank's bonds is *insignificant* next to the value of the bonds held by people like you and me, ordinary citizens, in our safe deposit boxes.)