China blasts US over debt problems

2011-08-06 11:15
Beijing - China roundly condemned the United States for its "debt addiction" and "short sighted" political wrangling and said the world needed a new stable global reserve currency.

In a harshly-worded commentary by the official Xinhua news agency on Saturday, China gave its first official comments on the United States losing its gilded AAA long-term credit rating from Standard & Poor's.

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," Xinhua said.

China also urged the United States to apply "common sense" to "cure its addiction to debts" by cutting military and social welfare expenditure.

"The US government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua wrote.

China also said further credit downgrades would very likely undermine the world economic recovery and trigger fresh rounds of financial turmoil.

"International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.

Chinese economists said the US credit rating downgrade posed a great risk to financial markets and they expected it to prompt China, the world's biggest holder of US Treasuries, to accelerate the diversification of its holdings.

S&P cut the United States' rating to AA-plus on concerns over the government's budget deficits and rising debt burden. The move is likely to raise borrowing costs eventually for the US government, companies and consumers.

Earlier this week, the United States narrowly avoided a default after lawmakers from across the political divide came together to hammer out a deal that would raise the country's borrowing authority after weeks of rancorous partisan battles.

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