James Fallows, a correspondent for the Atlantic, has written an article entitled “The $1.4 Trillion Question describing the tenuous economic relationship between China and the United States. Former Treasury Secretary Lawrence Summers has aptly described the relationship as the “balance of financial terror”.
The most shocking aspect of the relationship is the sheer size of China’s reserves — $1.4 trillion and counting. To provide perspective, $1.4 trillion is enough to purchase all of the following companies outright:
- Microsoft ($302.57 billion)
- AT&T ($226.89 billion)
- Proctor & Gamble ($201.52 billion)
- Wal-Mart ($196.36 billion)
- Bank of America ($185.06 billion)
- Google ($170.19 billion)
- Coca-Cola ($135.08 billion)
In 2007 alone, China added $461.9 billion to its reserves. This was nearly enough to buy Exxon-Mobil ($463.64 billion). Imagine China buying an Exxon-Mobile every year.
Other countries also have large supplies of foreign reserves (Japan, the United Arab Emirates, and Russia are the runners-up per Fallows). What they do with them will have profound effects on the American economy.
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