lunes, 7 de octubre de 2013

Beijing Urges US to Avoid Default - Wall Street Journal

BEIJING—China called on the U.S. to protect its investments there and take necessary steps to avoid defaulting on government debt, in the first official comment on the U.S. debt fight from the country's largest foreign creditor.

Noting that China is a major holder of U.S. Treasurys, Chinese Vice Finance Minister Zhu Guangyao warned on Monday that failure by the U.S. to raise its debt ceiling would have global ramifications.

"Because of this, we naturally are paying attention to financial deadlock in the U.S. and reasonably demand that the U.S. guarantee the safety of Chinese investment there," Mr. Zhu said, according to a report posted on website of the official Xinhua news agency.

"On the question of the debt ceiling, the Chinese side feels the U.S. needs to take realistic and resolute steps to ensure against default on the national debt," he added.

The comments highlight China's sensitivity to U.S. government debt and the nation's overall fiscal health. China has the world's largest stockpile of foreign-exchange reserves due in part to its efforts to encourage exports by holding down the value of its currency, the yuan.

While it doesn't disclose holdings, a major chunk of its roughly $3.5 trillion in foreign reserves is invested in U.S. government debt. China holds $1.277 trillion in overall Treasury debt, more than any other country. Japan is second with $1.135 trillion.

The comments from Mr. Zhu come a day after House Speaker John Boehner (R., Ohio) vowed to resist talks on increasing the debt limit unless Democrats agreed to discuss reducing the U.S. budget deficit. Republicans had previously been demanding the dismantling or delay of parts of the 2010 U.S. health-care law in exchange for an agreement to raise the debt ceiling.

President Barack Obama and Senate Majority Leader Harry Reid (D., Nev.) have repeatedly rejected Republican efforts to use the debt-limit deadline as a bargaining chip.

"The U.S. needs to consider the global impact," Mr. Zhu said, adding that the Obama administration and Congress "should accelerate discussions."

The Treasury Department has said it would likely exhaust emergency efforts to prevent the U.S. government from falling behind on its bills on Oct. 17. Congress' failure to reach a deal on funding the government led to a partial government shutdown on Tuesday, the same day China began its weeklong National Day holiday. China made similar comments in July 2011, the last time deadlock in Washington pushed the U.S. to the edge of default. The fight then was over the deficit and eventually led credit rating agency Standard & Poor's to downgrade the U.S. government's AAA credit rating for the first time in 70 years.

On Monday, Mr. Zhu recalled the downgrade in saying he hoped the U.S. would take a lesson from history and realize its responsibilities as both the world's largest economy and holder of the global reserve currency, according to Xinhua.

China has moved in recent years to diversify its holdings away from U.S. government debt, both to seek higher returns for its cash and to reduce risk. As of June, about 35% of the foreign-exchange funds held by China's State Administration of Foreign Exchange were in U.S. government debt, according to a Wall Street Journal analysis, compared with 45% in June 2010.

Recently, some Chinese officials have expressed concerns that a wind-down of bond-buying programs by the U.S. Federal Reserve meant to stimulate the U.S. economy could lead to capital leaving China as it returns to the U.S.

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