Here’s how it works:
- Americans buy Chinese goods: U.S. consumers buy a lot of cheap goods made in China. This creates a trade imbalance—the U.S. imports far more from China than it exports to China.
- China earns dollars: Chinese companies (and by extension the Chinese economy) get U.S. dollars from selling goods. But they can’t spend dollars locally, so…
- China invests in U.S. debt: The Chinese government, through its central bank, often uses those dollars to buy U.S. Treasury bonds—basically loaning the U.S. government money. So in a roundabout way, Americans borrow from China to fund their own spending, including things made in China.
- Peasants? Most of the time, it’s not individual Chinese workers or peasants directly loaning money to the U.S.—it’s the Chinese government or state-owned banks managing national reserves. But the labor of those workers fuels the system.
So it’s kind of like this: Americans borrow from the Chinese state. They buy things made by Chinese laborers. These laborers are often not richly compensated for their work.