News analysis
BEIJING –With days to go before the United States debt default deadline, Beijing aired its frustrations with the shutdown Sunday, saying it was time to consider a “de-Americanized” world order.
With $1.28 trillion in U.S. Treasuries, China is easily the biggest foreign holder of American debt.
China has also funneled billions of dollars into private American investments – to the tune of an estimated $54 billion in 2012 alone.
“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” according to a stinging op-ed article by state news agency, Xinhua.
The article, published Sunday, conveyed Beijing’s frustration with the spending and debt impasse that has paralyzed Washington for more than two weeks.
"Days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing,” the piece added.
Should Congress not come to an agreement by Thursday’s deadline on a new raised debt ceiling – the upper limit set by Congress on the amount of money the Federal government may borrow – China’s potential losses stand to be devastating.
Prior to Sunday’s commentary article, Chinese officials had been more measured in their analysis of the U.S. budget impasse. Last week, Vice-Finance Minister Zhu Guangyao noted only that “we have to see that the clock is ticking.”
To many in China, the restraint on the part of China’s ruling Communist Party over its second-largest trade partner’s government problems was perhaps based in the belief that neither party, Democrat or Republican, would allow the U.S. to not honor its financial obligations.
“If we are really rational, I cannot imagine why someone would dare to bear this kind of responsibility because any real default will have a huge impact not only on the U.S. and China, but on the global economy,” said Professor Zhao Longkai, a dean at the Guanghua School of Management at Beijing University. “It’s hard for us to imagine anyone can be that crazy to push the limit to that level.”
Zhao said the patience China had shown until recently was rooted not only in Beijing’s confidence in America’s ability to deal with the budgetary crisis, but also its own burgeoning self-confidence.
“For average Chinese people [the budget crisis] is a show there and we’ve seen it before… we also know that it's not only the United States that we are relying on, we have a lot of other investments,” Zhao said.
The Xinhua commentary may raise eyebrows in Washington, but Beijing’s frustration underscores a key point: Despite a desire to diversify its holdings, the Chinese government continues to buy U.S. Treasury bonds out of political and economic necessity.
As long as China’s domestic growth and stability are boosted by American debt, the deep ties between the two countries will likely endure.
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