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China is in default on a trillion dollars in debt to U.S. bondholders
By Andrew Hale
The Hill, Washington
Tuesday, July 4, 2023
Every country should pay its sovereign debt. Default, we are told, is not an option.
But has anyone told China?
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.
Successive U.S. administrations have chosen to sidestep this fact, allowing business and trade with China to proceed as normal. Now that the relationship with China has soured and the People's Republic of China has become the greatest adversarial threat to the U.S. and Western security, policymakers should revisit this appalling failure of justice.
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Some history is in order. Before 1949 the government of the Republic of China issued a large volume of long-term sovereign gold-denominated bonds, secured by Chinese tax revenues, to private investors and governments for the construction of infrastructure and financing of governmental activities. Put simply, the China we know today would not have been possible absent these bond offerings.
In 1938, during its conflict with Japan, the Republic of China defaulted on its sovereign debt. After the military victory of the communists, the Republic of China government fled to Taiwan. The People's Republic of China was eventually recognized internationally as the successor government of China. Under well-established international law, the "successor government" doctrine holds that the current government of China, led by the Chinese Communist Party, is responsible for repayment of the defaulted bonds. ...
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