America's Top Creditor: China

Recently, I read an article in Business Week discussing falling U.S. Treasury bond prices and the growing demands of America's top creditor, China. The article discusses the U.S. Treasury Secretary's recent trip to China, which was intended to help relieve some of the tensions associated with this issue. Here is an excerpt from the article ("Treasury's Geithner Faces an Assertive China", Business Week, May 31, 2009):

As China's economy shows signs of picking up and even growing 8% this year, Beijing is feeling no inclination to accept criticism from the beleaguered West. An assertive China will tell the U.S. to control the growth of its rapidly swelling budget deficit. Beijing is worried that Washington's spending policies will lead to inflation and further depreciation of the U.S. dollar. That would be bad news for China, the world's largest holder of U.S. Treasury bills, with an estimated $1.45 trillion in U.S. denominated-assets at the end of 2008.

With the U.S. government printing money like water and in debt to China to the tune of $1.45 trillion, I'm wondering if our elected officials need to learn the life lessons taught in Proverbs 22:7, which states that "the borrower is slave of the lender." If the demand for U.S. Treasuries falls rapidly due to selling pressure from China, it has the potential to send U.S. Treasury prices plummeting. For this reason and the associated inflationary risks, I'm not a big fan of U.S. Treasuries right now, especially those with long-term maturity dates. Personally, I won't be surprised if China's demands on the U.S. continue to increase.