US default: Beijing and Tokyo call on Washington to guarantee debt
Beijing (AsiaNews/Agencies) - The budget stalemate in the United States and the failure to increase the debt ceiling, which pit President Barack Obama and Republican hardliners, are rattling Beijing, irritating the upper echelons of the Chinese government.
The world's largest holder of US treasury bonds wants Washington to secure its investments. Japan shares China's concerns. Together, the two Asian nations hold more than US$ 2.4 trillion in US securities and fear destabilisation of world markets.
Moreover, for many governments and investors the stalemate over the debt ceiling is far more problematic than the current shutdown of US federal agencies, following the failure of Congress to reach an agreement on the new budget.
"As the world's largest economy and the issuer of the major reserve currency in the world, it is important for the US to maintain the creditworthiness of its Treasury bonds," Deputy Finance Minister Zhu Guangyao said yesterday in a tough warning.
This is important, he added, for the United States and the global economy, which is why Beijing hopes that before 17 October the US government will "take decisive and credible steps to avoid a default" and guarantee Chinese investments.
China, the largest foreign owner of US treasuries, had US$ 1.28 trillion worth at the end of July, followed by Japan, which held US$ 1.14 trillion, according to the US Treasury Department.
No wonder then that Japanese Finance Minister Taro Aso said "we hope this problem will be resolved without delay."
A default by the United States could cause investors to abandon the dollar and that would raise the value of the yen.
And any failure on the part of the United States to honour its debt obligations could damage the dollar's status as a reserve currency with devastating consequences on a global scale for investors.
However, Barack Obama and House Republicans are still locking horns. Democratic senators want to get to vote by the end of the week, a crucial step to ensure the president the authority to raise to 16.7 trillion US debt ceiling.
Meanwhile, Chinese President Xi Jinping expressed optimism and reassured leaders attending the Asia-Pacific Economic Co-operation forum (APEC) forum about his country' stability.
Speaking on the sidelines of the forum, the Chinese president said he was " fully confident " in China's economy, saying that its economic growth remained healthy and robust despite its recent slowdown. At the same time, he said that Beijing was willing to sacrifice the pace of growth for structural economic reform.
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