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China welcomes US debt deal but warns of choppy US Treasuries

08-04-2011 08:02 BJT

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US lawmakers may have averted a disastrous default by agreeing to raise the debt ceiling, but there are lingering concerns about the lasting impact on the world economy. As the largest foreign holder of US Treasury bonds, China is particularly concerned. On Wednesday, China's central bank governor welcomed the US debt deal but warned choppy Treasuries may hurt growth of world financial system.

Currently, the US is seen as the engine of the world economy and its dollar is the global currency reserve. But the acrimonious debate raised concerns for the country's biggest creditors, such as China, which holds than 1.5 trillion dollars in US Treasuries.

China's central bank governor, Zhou Xiaochuan, urged Washington on Wednesday to act responsibly to deal with its debt issues. Zhou said uncertainty in the US Treasuries market will undermine the international monetary system and hamper global growth.

His comments marked China's first official response to the passage of a US deficit-cutting deal. They came after weeks of bitter political wrangling that alarmed financial markets and brought the country to the brink of what some pundits predicted would be a catastrophic debt default.

Zhou welcomed US progress in dealing with its debt problems, but urged Washington to take what he called "concrete and responsible" measures to bolster confidence in US Treasuries. It is not only China that is re-examining the stability and predictability of US dollars.

Observers around the world say there has been nothing safe nor predictable in Washington's tussling over the national debt, and it will be the world who will shoulders the outcomes.

Andrew Fieldhouse, an analyst of Economic Policy Institute, said, "I think the United States looks rather foolish right now but I do not think we will have lost our standing in the world. Much of the world economy is in real trouble."

Chinese rating agency Dagong Global Credit Rating announced on Wednesday that it has cut the credit rating of the US from A-plus to A. The debt ceiling hike will not change the fact that US national debt growth has outpaced that of its overall economy and fiscal revenue, which will lead to a decline in its debt-paying ability,

So, while some of the shine might have gone off the US dollar, there does not seem to be any real alternative to it as the global currency. Analysts say with no alternatives, America's economic standing in the world is safe, at least until something better comes along.

China's Dagong downgrades U.S. credit rating to A from A+

Chinese rating agency Dagong Global Credit Rating has cut America's credit rating from A-plus to A. It is the first rating agency in the world to downgrade the country's credit rating. Zou Yun has more details. Full story >>

1. Responses to U.S. raising debt ceiling:

China urges U.S. to protect interests of its treasury investors

Zhou is urging America to take responsible measures to properly deal with its debt issues in a bid to protect the interests of investors in U.S. treasuries... full story>>



China may diversify forex portfolio

China, the largest foreign holder of US debt, is faced with the challenge of diversifying a massive foreign exchange portfolio endangered by a weakening dollar... full story>>



Studio interview: Should China diversity forex holdings against downgrading of U.S. credit rating?

What can China do to protect its foreign reserves, mostly made up of US Treasuries? Invest elsewhere? Where...full story>>



Asian nations welcome US debt solution

Many countries here in Asia are major holders of US Treasuries, so their economies are closely linked to that of the US... full story>>



Americans skeptical on US debt deal

The agreement made in Washington to cut more than $2 trillion in spending and raise the amount the U.S. government can borrow, is getting far from a resounding thumbs up from average citizens... full story>>



2. Market expectations & reactions:

Crossover: Market reactions & expectations for U.S. central bank after deal

The US debt ceiling has been raised. What's the reaction been in the US? We're joined by our corespondent Nathan King in New York... full story>>

Wall Street drops on economic concerns after Washington debt deal

The Wall Street closed sharply lower on Tuesday after Washington debt battle as investors lost confidence on economic recovery, with the S&P 500 hitting the lowest point for the year... full story>>

Asian stocks fall amid US debt worry

Stock markets across East Asia are down on worries about a possible cut to the US debt rating... full story>>

S.Korean financial markets fall into panic on U.S. double-dip concerns

South Korea's financial markets fell into panic on Wednesday due to renewed concerns that the U.S. economy may enter into double-dip recession... full story>>


3. Analyses of impacts of US debt crisis:

China: Impact of US debt crisis on China

According to some experts, the main impact for China lies in the import and export sectors which are closely related to the Reminbi's exchange rate against the dollar... full story>>


China: US debt crisis's impact on China's investment

we're joined in the studio by Xu Sitao, Chief China representative for The Economist Group. What impact will the US debt crisis have on China's investment in the US... full story>>


U.S.: Impact of debt deal on Obama administration and U.S. economy

The US will be going to the polls for a presidential election next year, so what impact will the debt deal have on the Obama administration and the US economy? Let's turn to Professor Richard Cooper in the studio... full story>>

World: US debt deal's impact on global economy

The world economy has suffered a lot throughout their negotiations. So what impact do you think the debt crisis will have on the global market? we are joined by Doctor Liu Youfa, vice president of the China Institute of International Studies... full story>>


4. Challenges remain ahead:

U.S. debt deal raises future concerns

The problem is far from being solved. The US debt crisis has worsened, especially in recent years... full story>>

Relief short-lived, bigger cuts needed to resolve U.S. debt problem

A last-minute deal on the US debt ceiling brings welcome relief, but further negotiations involving much bigger cuts will be needed to resolve America's debt problem... full story>>   

Interview: US debt crisis over or postponed?

Is the crisis now over or simply postponed? Could you outline the challenges which lay ahead? We are joined in the studio by Professor Richard Cooper from International Economics at Harvard University... full story>>

Studio interview: How does U.S. get out of the vicious circle of using new debts to repay old ones?

A last minute deal to raise the debt ceiling, but as we just heard, the US' debt problem is far from over. Essentially, the US is using new debt to repay old debt. How does it get out of that vicious cycle... full story>>


Editor:Zhang Dan |Source: CNTV.CN

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