Creditor Name: Taiwan
Amount of U.S. Debt Owned: $234 billion
This small island nation makes nearly all of its money exporting goods to Europe, the U.S. and China. So when the world economy is good, the Taiwanese economy is very good [source: Shapiro]. But to hedge for the bad times, Taiwanese investors put their money in the safest securities in the world: U.S. debt.
Taiwan is a democracy with a constitution and a freely elected president. After World War II, the Communist party wrested control of the government from the Nationalist party and created the People’s Republic of China (PRC). But many Nationalist leaders and sympathizers relocated to Taiwan, officially called the Republic of China [source: Bloomberg]. In essence, there were two Chinas. And the crazy thing is, there still are!
Both mainland China and Taiwan considered themselves the “one China,” and the U.S. often finds itself in awkward diplomatic territory. On the one hand, America recognized PRC as the “real” China and severed diplomatic relations with Taiwan in 1979 [source: Maizland]. But on the other it sells Taiwan 100 percent of its arms, a $129 million transaction [source: Frohlich]. Money from Taiwanese investors also helped fuel the economic boom on the mainland [source: CIA World Fact Book].
Recently, the relationship between Taiwan and China has become increasingly tense, with China warning it will take back the renegade province by force, if necessary [ source: Maizland]. If a war between the two ensues, no one knows how the U.S. would respond.
Read the full article here