USA cannot refuse to pay back Chinese loans. it is not like you refuse to pay back your neighbor or refuse to pay back a student loan. China doesn’t have to deal with US directly to lend or borrow. The loans are sold as treasury bills on the international financial market. China can sell off the US loans on the same financial market anytime if China sees the bond to become risky investment or it find a better investment elsewhere. The owner of the US debt are changing hands everyday in the market. As another answer said, if America defaulted on its loan, it will have to default on all its loan to any other countries who hold its treasury bills. it means US credit rating will be down, the interest rate has to increase for USA to borrow (more expensive for US to borrow), the value of its bonds will vanish. The latter will have unthinkable impact on American’s fund and pension. As for China? It just need to sell off US debt and find another financial instrument, maybe buy American land and companies since dollar will be so cheap.
“What If China Collected on U.S. Debt?”
