They don't -- at least not directly. This lend less policy is for Chinese banks lending to Chinese citizens and businesses. They didn't tell US banks not to lend to US citizens

Indirectly they have some influence on government policy in that they can stop buying US debt if they feel that the debt is starting to become too risky but that is no different than any other country and it is not limited to debt. Canada can stop selling China stuff or stop buying stuff exported from China as a way to influence Chinese policy. That rating companies view the NDP as a major credit risk influences our policy in that they could never form a government without increase Canada's ability to borrow money. This is just globalization. With China holding so much debt it is a little scary but the reality is they can't really hold any other currency so there is no threat of them torpedoing the USD.

While it's good that China is trying to increase their reserves.... my point was simply that it scares me that communist China's government has ANY control over America's debts, Canada's debt etc...

http://en.wikipedia.org/wiki/Communist_Party_of_China

I'm not sure what you mean by treasury bills going up in value. They have a set value and interest rate. While they do trade and the value fluctuates the US liability is set on the date of issue and never changes.

The only concern is that future issues of treasury bills won't sell at auction and the US will have to offer higher yields to get people to by them. Something that for now hasn't been a concern and likely won't be if the US remains responsible.

China can't cash in as they hold an asset that is highly correlated with USD value and attempting to cash in would devalue the USD such that China would end up losing a ton of money

That is why it is good that China holds so much USD. Any move by China to get out of USD hurts China so they can't. On the other hand the US has to be responsible with their economy or China can show dissatisfaction and fire a warning shot at the next auction. It basically creates a standoff between what are really the two super powers in that they both have a common goal of maintaining USD value.

How can that be good that china owns US treasury bills? If the treasury bills go up in value that could cost America double or more if china decides to cash in. The Chinese and the Russians are thinking of buying into the Canadian currency, I also think that is not a good idea.

This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion/day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China.

China ordered Chinese banks to stop lending which is a power every country has over their own banks. The government of every country regulates the ratio of lending to reserves and by changing that ratio can basically increase or decrease lending. Chinese banks can still lend but with the new tighter ratio most likely are not going to have any room. Canada has been tweaking our ratio but the changes are negligible and really had no impact but our ratio was always very conservative.

The fact that China owns US treasury bills is actually good. It means they have a vested interest in keeping the USD strong. It also means they have the ability to keep the US in check when they do irresponsible things. It is basically the equivalent of the Cold War standoff but in financial rather than nuclear terms.

America owes China two trillion dollars. But what does that mean?

http://blogs.telegraph.co.uk/news/timcollard/100011049/america-owes-china-two-trillion-dollars-but-what-does-that-mean/

good find average_joe,
wow.. when you think about it... if the governments ordering the big banks to stop lending for the rest of January, that must mean they have alot of control..

so... does that also mean that the Chinese government has control over all of the debt lent to the U.S.??/ That's pretty scary.!!

Financial Post
SHANGHAI/BEIJING -- Chinese authorities ordered some big banks to curb lending for the rest of January, intensifying their efforts to prevent the world's third-largest economy from overheating.

The news on Wednesday weighed down stocks in Asia and Europe and oil fell toward US$78 a barrel on fears that demand in China, the world economy's main source of growth, may now slow down as authorities tighten policy.

China's central bank told some banks, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources told Reuters.

Read more: http://www.financialpost.com/news-sectors/story.html?id=2463112#ixzz0dAL64hpR

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http://www.financialpost.com/news-sectors/story.html?id=2463112