Originally Posted by dyna mo

here's a better explanation than mine-

"Over the past two decades, the United States and China have developed a special relationship based on the safety of U.S. debt. In essence, the United States gives China access to the wealthiest consumer market in the world, which in turn soaks up China?s massive output of consumer goods. This not only provides income for Chinese exporters, but also helps ensure social stability in China by providing employment ? which is Beijing?s primary economic policy goal. China in turn invests its large trade surpluses, earned in U.S. dollars, into U.S. Treasury debt (e.g., 30-year bonds or 10-year notes). This allows China to store its earnings in one of the largest and most liquid financial markets in the world, without needing to convert between currencies. Meanwhile, the recycling of surpluses into Treasury instruments helps to bankroll continued U.S. spending. It is vendor financing on a global scale."