Chinese Media Is Heckling the U.S. on Its Debt Ceiling Crisis
With Washington mired in political gridlock and the debt ceiling deadline only days away, there are signs that China–the top holder of U.S. debt–is growing increasingly concerned about its U.S. investment, which accounts for about 70 percent of its $3.2 trillion in foreign exchange reserves. The Chinese government itself hasn’t yet officially comment on the debt crisis. But on Thursday, China’s state-run news agency, Xinhua, ran an editorial by a Deng Yushan lashing out at U.S. politicians for playing a “dangerously irresponsible” and politicized “game of chicken” that risks “strangling the still fragile economic recovery of not only the United States but also the world as a whole.” The editorial adopts a lecturing tone, reminding the U.S. that “with leadership comes responsibility” and calling out America for the “debt addiction” it can’t seem to kick. “With its debt approximating its annual economic output, it is time for Washington to revisit the time-tested common sense that one should live within one’s means,” Yushan concludes. A separate report noted that U.S. lawmakers were “wasting precious time on finger-pointing, public showdowns and tough backdoor bargains to secure the best deal for their own parties.” Are these perhaps the opinions of some rogue journalists? Doubtful. Xinhua’s “commentary is sure to have been officially sanctioned,” AFP points out.
Xinhua isn’t the only Chinese news outlet criticizing the U.S. On Friday, the overseas edition of the Communist Party’s People’s Daily warned that a U.S. debt default could weaken the U.S. dollar, spark a “torrential flood” of liquidity into the global economy, and drive inflation in emerging economies such as China, according to AFP. A day earlier, John Gong, writing in the state-run Global Times, advised his readers to think of the debt crisis as “maxing out the credit card limit, only that you can change that limit on your own while lawmakers in Washington don’t know how to.” He added that while “the two-party American political system has many merits as a functioning democracy,” the debt debate exposes “the downside of deadlocked partisan politics.”
China is broadcasting its unhappiness in other indirect ways. Last week, China’s foreign exchange regulator urged the U.S. to get its spiraling debt under control or risk damaging its credibility. Stephen Roach, a Morgan Stanley official in Asia, tells Bloomberg that senior Chinese officials he’s spoken with are “appalled” by the debt standoff. Politico reported yesterday that the Chinese rating agency Dagong Global will be downgrading U.S. debt more than it already has regardless of whether U.S. lawmakers strike a deal. But not everyone’s convinced the Chinese would suffer in the event of a U.S. default. Senator John Kerry told The National Memo on Thursday that “the Chinese are laughing all the way to the bank” because a downgrade of the U.S. credit rating would mean America would have to pay billions more in interest payments to the Chinese.
In this Wall Street Journal video, China bureau chief Andrew Browne explains how, in private, Chinese officials are expressing “great disquiet over the possibility of a default.”