By Wang Jianhua, Zhang Lixin, and Wu Qiong
BEIJING, March 31 (Xinhua) The United States, the world's most developed country, is scrambling to answer the question "Who will 'feed' the U.S.?" years after it had asked the most populous developing country a similar question: "Who will feed China?"
Is it sensational to ask the U.S. the same question that China faced more than 10 years ago? The reply is "No." This time, it is not about "grain supply", but "capital supply".
An unprecedented financial crisis that originated in the U.S. is shattering the world, without exception to any region. In response, the U.S. has announced massive rescue plans to revive the economy, and is ready to roll out more such plans, yet leaving a big question mark as to how it will get enough money to finance those plans.
The U.S. Congress sanctioned a 787-billion-dollar stimulus plan submitted by the Obama administration last month, which media reports said is only a small fraction of the overall plan.
The U.S.-based San Francisco Business Times reported the U.S. government and the Federal Reserve is harboring a huge 8.5-trillion-dollar rescue plan, or about 60 percent of the country's GDP.
U.S. President Barack Obama is expecting a record 1.75 trillion U.S. dollar in federal fiscal deficit this year. The fiscal figure reached a high of 459 billion U.S. dollars last year.
This year's deficit would account for 12.3 percent of the GDP, the highest since the World War II and far exceeding the recognized 3-percent alarm level.
In addition, Obama also foresaw an average 1 trillion U.S. dollars in deficits each year for 2010 and 2011.
Many U.S. experts said Obama's estimate was too optimistic, and the actual deficit would be even bigger, as the president excluded the country's liabilities in his projection.
Who will be able to provide the financial support for the enormous fiscal deficit of the U.S. government?
The U.S. Treasury Department estimated the U.S. government would issue up to 2.56 trillion dollars of treasury bonds this year, and at least 1.14 trillion more next year.
2.862 trillion U.S. dollars, is held by foreign governments or investors. That means the country's reliance on overseas investors holding treasury bonds has been raised by 10 percentage points from eight years ago.
"The world simply cannot buy any more new issuance of U.S. treasury bonds," said Yu Zuyao, an honorary economist with the Chinese Academy of Social Sciences (CASS), who used to head the Institute of Economics.
Emerging economies hold a combined 5.5 trillion U.S. dollars in forex reserves, but most of the reserves have already been used to buy U.S. treasury bonds, said Yoko Kitazawa, an expert on international affairs, in a February issue of Sekai, a Japanese monthly journal.
The largest holder of U.S. treasury bonds and the world's second largest exporter, China's forex reserves stood at about 1.95 trillion U.S. dollars at the end of last year, the largest in the world.
Yang Bin, also a CASS economist, said the U.S. was luring capital scattered all over the world to pool in the U.S. by floating excessive treasury bonds, which could be a threat to developing countries which are crying out for capital. Economic development in many developing countries is, to a large extent, counting on such an influx of overseas capital. The U.S-based Institute for International Finance warned in January that capital flows are in danger of collapsing this year.