A Tale of Two Economies: The U.S. and China

Includes: FXI, IVV, PGJ, SPY
by: David Hunkar

In this post, let's take a look at some of the differences between China and the USA. The chart below shows the comparison of government finances between the two countries.

click to enlarge


Source: Der Speigel

China has the world’s largest foreign currency reserves. Though the chart says it is $1.9T, the more recent figure was $2.4 Trilllion at the end of December 2009.

The public debt as a percentage of GDP for the U.S. is more than double that of China at about 38%.

China’s total external debt is just $400B. China is the creditor nation in this comparison while the U.S. is the debtor nation. Currently the gross external debt of the U.S. is a whopping $13.75 Trillion. According to the U.S. Office of the Treasury, the majority of this debt is in the form of long-term bonds and notes.

Clearly the U.S. has long ways to go before it can eliminate the public debts to low levels and become a creditor nation again.


The services sector forms about 80% of the U.S. economy whereas in China it is just 40%. Since the majority of the U.S. manufacturing was relocated offshore to developing countries, this sector accounts for just 19% of the U.S. economy. In China manufacturing accounts for 49% of the economy. A significant portion of the services sector economy in the U.S. was based in the FIRE (Finance, Insurance and Real Estate) industries. Since the credit crisis, the financial and real estate sector have laid off thousands of workers and the industries are still on shaky grounds. For example, it may be many years before a meaningful recovery takes place in the real estate industry.

One way for the U.S. to accelerate the economic recovery would be to invest heavily in the manufacturing sector and increase it level of exports.