China’s official media on Saturday hit out at the United States for its “addiction to debts” and for letting domestic politics hold the world economy “hostage”, saying that China now had “every right” to demand the U.S. address its debt problems in the wake of the country losing its top credit rating.
The official Xinhua news agency also called for “international supervision” over the U.S. dollar and for a new stable global reserve currency, in a commentary issued in response to Saturday’s downgrading of the U.S. credit rating by Standard & Poor’s, to A-plus, for the first time in history.
“China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets,” the commentary said.
“Though the U.S. Treasury promptly challenged the unprecedented downgrade, many outside the United States believe the credit rating cut is an overdue bill that America has to pay for its own debt addition and the short-sighted political wrangling in Washington.”
The commentary also made the case for “international supervision over the issue of U.S. dollars” to be introduced and for a “new, stable and secured global reserve currency” to be considered as an option to avert “a catastrophe caused by any single country.”
“A little self-discipline would not be too uncomfortable for the United States, the world’s largest economy and issuer of international reserve currency, to bear,” it said.
On Wednesday, Chinese credit rating agency Dagong Global announced it would degrade U.S. treasury bonds for the second time since last year. Xinhua said Dagong’s move was, at the time, met “with a sense of arrogance and cynicism from some Western commentators”.
“Now S&P has proved what its Chinese counterpart has done is nothing but telling the global investors the ugly truth,” the commentary said calling for Americans “to do some serious soul-searching to bring their country back from a potential financial abyss.”
This week’s political wrangling in the U.S. over the debt issue has received wide coverage in recent days in the media in China, with State-run papers saying the U.S. only had itself to blame for its debt problems and was failing its global responsibilities because of domestic politics.
Chinese officials have, however, struck a far more cautious note than the media, with a wide realisation that even as China continues to pressure Washington on the issue and looks to diversify its holdings, the U.S., even downgraded, still remains the country’s best option for foreign currency investments.
Earlier this week, Zhou Xiaochuan, the Governor of the People’s Bank of China, the Chinese central bank, said China would “closely observe” how the U.S. would implement recently approved legislation to raise the debt limit. He added that China would continue to diversify its foreign currency investments.
