to update this as it is not accurate: "Domestic credit creation is funding foreign savings. Assume you live in the US and decide to buy a car made in the China. You go to a US bank, get accepted for a loan, and spend the dollars on the car. So where do things then stand? You exchanged the borrowed dollars for the car, the Chinese car company sells the dollars to the Chinese government, the Chinese government buys US bonds (has a deposit at the Fed), the Chinese government provides the Chinese car company yuan (the Chinese government does not need to get yuan to spend them) to pay employees, and the Fed provides funding to the bank." Unfortunately we have not increased aggregate demand, the bank loan is offset by the purchase of US bonds. The demand that used to exist was met by foreign workers, therefore the GDP and employment in the US is not improved, in fact, since the expectation may be that future demand for cars will be met by foreign supply, a US car company may not invest in production facilities to make future cars, which decreases employment in design, engineering and construction in the US. The goal of the Chinese government is to increase employment, primarily for social reasons. The last thing any government wants is a huge population of employed citizens, especially one where there is a great deal of political control, socially and economically, throughout the country. Therefore the Chinese have an