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Xi Jingping said China would cancel debts to the world's least developed nations, including small island nations. China Has Forgiven Nearly $10 Billion In Debt. Cuba Accounts For Over Half. But China wasn't punishing, and is not in G7.

I ask in context of recent articles like "How to make China pay for COVID-19" by John Yoo BA Harvard (History), JD (Yale), Law Clerk, Justice Clarence Thomas, U.S. Supreme Court, 1994-95.

China’s expansion into foreign property renders it vulnerable.  The United States could expropriate Chinese property in the United States. Conceivably, Washington could even cancel Chinese-held treasury debt and using the proceeds to create a trust fund that would compensate Americans harmed by the pandemic.  It could claim that in cancelling Chinese holdings of U.S. Treasury debt, the United States is only recouping China’s international debt cancelled by the Chinese Communist Party when it seized power in 1949.

Gunnar Gundersen J.D. Pepperdine University School of Law wrote "Cancel All Debt to China"

I have a simple, bold, and decisive step we can take: cancel all American debt held by the CPC, whether by the Chinese government or companies controlled by them. That is debt we can finance with someone else and use the money to give relief to Americans who need it and to bring manufacturing home.

But Ben White explained "Why we can't 'cancel' U.S. debt held by China"

Why we can’t “cancel” U.S. debt held by China — The Washington Post ran a story suggesting that President Donald Trump and some of his advisers want to retaliate against China over claims the Chinese withheld critical information about Covid-19. The story included this completely insane threat: “Some administration officials have also discussed having the United States cancel part of its debt obligations to China, two people with knowledge of internal conversations said.”

It should go without saying — but we suppose it has to be said — that any such move would essentially explode global financial markets. The Chinese own around $1 trillion in U.S. Treasury securities. They along with the Japanese and many other nations fund our debt and deficits. U.S. Treasury bills and the dollar underpin global financial markets. And the full faith and credit of the U.S. government to meet all its debt obligations is the main reason this is possible.

Any move to “cancel” debt held by China — i.e. default on it — would destroy the full faith and credit of the U.S., send U.S. interest rates soaring and could ignite a global financial catastrophe. So when MM asked top White House economic officials about the suggestion, they were lightning fast to deny it, replying within moments, which as any reporter knows is not always the case.

  • Apparently, Commie leftist ideas has gained traction even in the American mainstream. It's very common to hear something like that in Russia or other post? Communism countries, but in the US it's something new. – user907860 May 2 at 22:28
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    @RodrigodeAzevedo the US government is responsible only to the American people per se. So if Congress authorizes such a move the government definitely won't be obliged. But too many people/businesses in the world trust the US government and the US dollar. Such a move will destroy this trust. – user907860 May 2 at 22:38
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    @user907860 Russia hasn't been communist since 1991. Leftists in the US are no way near to being communists. You might want to change which network you watch. – Jurp May 3 at 0:58
  • @Jurp Wonder, where did all those communists go? They must've died in 1991. Seriously: 1. Russia has the socialist-minded population. 2. the Russian administrative elite (who all were communists in 1991) is still in its position, slowly being replaced by natural reasons. 3 the previous 2 points pertain to Ukraine/Belarus almost identically. – user907860 May 5 at 19:28
  • You obviously don't know any Russians. While there is a distinct nostalgia for the Communist past among the generation 50 and over, the younger generations know only a lassiaz-faire/kleptocratic capitalism. Many of the older folk want the old, (stereo)typical "strong man" leader, a la Stalin. Putin was in the KGB and, based on his government's actions, never a "good" Communist - he's interested in only amassing wealth for his family and oligarchic/criminal associates. He's also VERY interested in de-stabilizing the West, particularly through his asset Trump. – Jurp May 5 at 23:52
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No.

First of all, we should make clear what is meant here by the world "cancel". The question seems to confuse two very different things. China (as creditor) has forgiven debts owed to it by Cuba and other borrowers. What the Trump administration is allegedly contemplating here is that the US (as borrower) would willfully default on the money it owes to China. Forgiving debts you are owed and defaulting on debts you owe are not the same thing.

For a major industrial economy to unilaterally void any portion of its foreign debt in this way would be an absolutely unprecedented move. If you look at the list of sovereign debt crises on Wikipedia and sort by date, you'll see very few recent ones involving major industrial economies in the post WWII period. I'm not seeing a single case where a G7 country has been in default. Even when other relatively major economies have been in default, like the 1998 Russian financial crisis, I do not expect you will find any such countries were stating that they didn't intend to pay, nor were they withholding payment in order to punish their creditors.

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    where did you get the idea that Trump is proposing this? – user907860 May 2 at 22:30
  • @user907860 Thanks for the question. I've adjusted the wording slightly, but I am referring to the Washington Post story that Ben White is referring to in Politico. – Brian Z May 2 at 22:37
  • thanks. i changed "cancelled" to "deliberately defaulted" on your advice. – Dongmei May 2 at 22:51

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