China has expressed strong concern at the downgrading of America’s triple A credit rating by Standard and Poor.
Statements were issued through the official Xinhua news agency. In one it says that as the largest single creditor to the US China has “every right to demand that the US address its structural debt problems to ensure the safety of Chinese dollar assets.”
The statement also calls for the “international supervision of the issue of US dollars”, and suggests a “new, stable and secured global reserve currency could help to avert any future catastrophe”.
Francis Lun, Managing Director of Lyncean Holdings, said: “The price of government bonds will fall. China holds about 1.1 trillion US dollars in government debt…if the price drops by one per cent then China will suffer an eleven billion paper loss immediately.”
Clearly worried about the level of exposure to American dollar-debt, the statements are very critical, accusing the US of leisurely squandering unlimited overseas borrowing. China says that America has to re-establish what it called the “common-sense principle that one should live within one’s means.”
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