A major imbalance: China no longer recycles its surpluses in the United States

From the mid-1990s to 2013, there was a mutually beneficial arrangement between the United States and China: China had very large external surpluses with the United States and recycled these surpluses in the form of central bank purchases of dollar-denominated financial assets thanks to its accumulation of foreign exchange reserves. Thus, China financed US purchases of Chinese products, which was good for both countries. But since 2014, this arrangement has been out of kilter . China still has a very large trade surplus with the United States, but recycles it no longer in the form of loans to the United States but rather in investments by non-central bank economic agents in countries other than the United States. This explains the tensions between the United States and China: the United States has a growing external deficit with China that China no longer finances.