The Chinese Vice Foreign Minister, Zhu Guangyao, told America\u2019s deadlocked politicians on Monday that \u201cthe clock is ticking\u201d and called on them to approve an extension of the national borrowing limit before the federal government is projected to run out of cash on 17 October.<\/p>\n
The American government entered its seventh day of shutdown on Monday, following the failure of Congress to approve the national budget a week ago. And there was little sign of progress on the still more crucial issue of the fast-approaching \u201cdebt ceiling\u201d\u00a0 deadline. Yet rather than indicating\u00a0 a willingness to negotiate, the Republican Speaker of the House of Representatives, John Boehner, stated on Sunday that it was \u201ctime for us to stand and fight\u201d over the budget. He added that a default was \u201cthe path we\u2019re on\u201d. American stock markets opened down in response to the belligerent comments yesterday, with the S&P 500 Index of leading shares shedding 0.5 per cent.<\/p>\n In September 2008 China eclipsed Japan to become the biggest single foreign creditor of the US federal government. The US administration estimates that the China government holds at least $1.3 trillion of its bonds. The total could be higher because Beijing is known to hold American debt through intermediaries. And, in total, the Beijing authorities have $3.5trn of dollar-denominated assets, which would also be hit hard in the event of a default.<\/p>\n These vast foreign exchange holdings are a by-product of China\u2019s closed financial system and persistent current account surplus, which means that most foreign currency that enters the country accumulates with the central bank. The central bank then invests the money in normally \u201csafe\u201d dollar assets. The vast dollar reserves are also a legacy of China\u2019s policy in recent decades of artificially holding down the value of its currency, the renminbi, in order to boost the overseas sales of its politically influential export industry.<\/p>\n However, economists have criticised the popular idea that China could exert political or economic leverage over Washington by threatening to sell its dollar investments, since such a drastic shift would ultimately serve to undermine the paper value of Beijing\u2019s own vast investment portfolio. Nevertheless, China\u2019s creditor position and its status as the world\u2019s second largest economy gives its voice some authority in Washington and Mr Zhu made it clear that private representations had already been made. \u201cThe US is clearly aware of China\u2019s concerns about the financial stalemate and China\u2019s request for the US to ensure the safety of Chinese investments,\u201d he said yesterday.<\/p>\n Since the global financial crisis, which led to a sharp depreciation in the value of the dollar against the renminbi, the authorities in Beijing have been concerned about the fact that so much of their national reserves are held in the form of the American currency. China has been promoting the idea of a new reserve currency to replace the greenback, with some analysts suggesting that the renminbi could one day take its place.<\/p>\n Mr Zhu stressed that it was vital, not only for China but the wider global economy, for America to resolve its budget impasse. \u201cSafeguarding the debt is of vital importance to the economy of the US and the world,\u201d he said. Referring to a similar deadlock in 2011, which led to a downgrade of the US AAA credit rating by the Standard & Poor\u2019s agency, Mr Zhu said: \u201cWe hope the United States fully understands the lessons of history.\u201d<\/p>\n The concerns over the stability of the dollar come at a time of geo-political flux. Barack Obama has sought to \u201cpivot\u201d his foreign policy to Asia to counter China\u2019s growing military influence. But the shutdown has forced the US President to cancel his visit to Asia this week to attend a summit. – The Independent<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" China, the biggest foreign creditor of the United States, has waded into the American budget crisis, warning Congress that it must resolve the political impasse over the debt ceiling without further delay. The Chinese Vice Foreign Minister, Zhu Guangyao, told America\u2019s deadlocked politicians on Monday that \u201cthe clock is ticking\u201d and called on them to … Continue reading “China warns US as Republicans vow to stand and fight”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":10920,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,3,10,123],"tags":[6799,6800,4223,6798,3546,6802,6801,6803,12251],"class_list":["post-10918","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-and-finance","category-news","category-united-states","category-world","tag-american-budget-crisis","tag-beijing","tag-congress","tag-geo-political-flux","tag-john-boehner","tag-republican-speaker-of-the-house-of-representatives","tag-shutdown","tag-stand-and-fight","tag-united-states"],"cc_featured_image_caption":{"caption_text":false,"source_text":false,"source_url":false},"jetpack_featured_media_url":"https:\/\/praag.org\/wp-content\/uploads\/2013\/10\/uschina.jpg","_links":{"self":[{"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/posts\/10918","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/praag.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10918"}],"version-history":[{"count":2,"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/posts\/10918\/revisions"}],"predecessor-version":[{"id":10922,"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/posts\/10918\/revisions\/10922"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/praag.org\/index.php?rest_route=\/wp\/v2\/media\/10920"}],"wp:attachment":[{"href":"https:\/\/praag.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10918"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/praag.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10918"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/praag.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10918"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"uschina\"](\"http:\/\/praag.org\/wp-content\/uploads\/2013\/10\/uschina.jpg\")
<\/a>\u201cWe ask that the United States earnestly takes steps to resolve in a timely way the political issues around the debt ceiling and prevent a US debt default to ensure the safety of Chinese investments in the United States,\u201d\u00a0 Mr Zhu told reporters in Beijing. \u201cThis is the United States\u2019 responsibility,\u201d he added.<\/p>\n