China — which holds nearly $1.3 trillion in U.S. securities (pdf) — is asking the U.S. to get its finances in order and not allow a political stalemate to cause the country to default on its obligations for the first time in history.
The United States is expected to run out of money by Oct. 17, so the Treasury needs Congress to extend its credit limit before then. As has happened before, the House and Senate are at odds and the prospects of a compromise look shaky.
Xinhua, the official Chinese news agency, reports:
" 'The U.S. is the world's biggest economy and a major country issuing reserve currency. Safeguarding the debt is of vital importance to the economy of the U.S. and the world,' China's Vice Minister of Finance Zhu Guangyao told a press briefing held by the Chinese Foreign Ministry.
" 'This is the United States' responsibility,' he said, adding that China hopes the U.S. will address the challenges facing its economy, solve the government disputes over the debt ceiling and keep the recovery process in the U.S., and the world, going.
"Zhu noted that as the world's two biggest economies, China and the U.S. maintain close economic ties, and that China is naturally concerned about the deadlock of the U.S. fiscal situation and reasonably asks the U.S. side to ensure the safety of China's investment in the United States."
The Financial Times quotes a senior Japanese official as saying Japan is also "very worried about the potential impact on currency markets."
The paper reports:
"While the official said he was 'very confident' such an outcome would be averted, he recalled the 'chaos' in September 2008 when the US House of Representatives initially rejected a $700bn bailout of the stricken financial services industry."
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