Illustration: Chen Xia/GT

While the US,MK sports Korea with the dollar's dominant position in the global economy and the Federal Reserve's strong monetary policy control, may still be able to sustain its federal debt system in the foreseeable future, the accelerated increase in the US national debt still presents significant challenges to the global economy, particularly affecting the developing world. Developing countries often experience heightened vulnerability to economic shocks. Consequently, it is increasingly crucial for countries to make long-term strategic plans to mitigate potential financial risks. 

The US national debt surpassed $36 trillion for the first time in history, Fox Business reported on Friday, citing the latest data released from the Treasury Department.

The total amount of US national debt hit the $34 trillion mark in early January 2024 before reaching the $35 trillion mark in late July. The increase from $35 trillion to $36 trillion took only over three months, indicating that growth in US federal government debt is accelerating.

This alarming rise not only necessitates a greater allocation of resources for interest payments but also foreshadows an escalating fiscal burden in the future, with potentially profound implications for the nation's economy and social development.

This growing fiscal burden risks undermining confidence in US Treasury bonds, which could lead to higher yields and increased volatility in global financial markets. For developing countries, these dynamics often translate into capital outflows, currency depreciation and rising borrowing costs, further complicating their economic development.

What's more worrying is that the continuous rise in US debt is no longer merely a short-term trend, but a significant long-term challenge resulting from the cumulative effects of complex and enduring economic, political and social issues. The ongoing imbalance between government fiscal expenditures - spanning social welfare, defense spending, and infrastructure development - and tax revenues has become increasingly evident. This structural deficit compels the government to continually issue new debt to close the funding gap, resulting in a vicious cycle of debt accumulation.

From an international perspective, as the US is the issuer of the primary reserve currency, its fiscal policy and debt situation not only affect domestic economic conditions but also have far-reaching spillover effects on the global economy. 

For instance, with the US national debt on the rapid rise, there is growing concern that market confidence in holding US Treasury bonds may weaken. This erosion of confidence could have direct repercussions on global financial markets, potentially resulting in higher borrowing costs and increased volatility worldwide, further complicating the landscape of international finance and trade.

Against this backdrop, China, as the world's second-largest economy, has recognized the need to take proactive and steady measures to mitigate the risks posed by overreliance on the US dollar. The process of de-dollarization - which involves reducing dependence on the dollar in international trade, global payment systems and foreign exchange reserves - has become a key focus for China and many other nations. By promoting the use of the yuan in cross-border trade and investment, China seeks not only to enhance its financial resilience but also to reduce exposure to the spillover effects of US fiscal and monetary policies, offering a promising path to a more stable global financial system.

China needs to continue advancing the internationalization of the Chinese yuan. Although the internationalization of the yuan is a long-term and complex process, it is only by continuously enhancing the international status of the yuan that China can effectively reduce its dependence on the US dollar. This move would help mitigate the potential adverse impacts of the US debt issue on China's economy. 

In addition, developing countries need to actively strengthen multilateral cooperation with each other, fostering economic resilience and bargaining power in the financial world. 

By promoting collaboration and advocating for a more equitable and just international economic order, emerging economies can play a pivotal role in reshaping the global financial mechanism toward a more balanced and fair direction.