China is worried and for once it’s not putting on a brave face.
Amidst already sluggish growth the world’s second largest economy finds itself holding trillions in U.S. bonds, trillions that could easily become less valuable if the U.S. defaults come Oct. 17.
The partial shutdown in the U.S. is really China’s worst nightmare. The system which has worked so well for a long time – China selling goods and services to the U.S. then purchasing U.S. Treasury bonds with the returns – is suddenly looking precarious with China holding $1.3 trillion in bonds and $3.5 trillion in dollar-denominated assets, and a potential default on the clock, TIME reported on Wednesday.
With a huge portion of its wealth tied up with the fate of the U.S., it’s understandable that China is concerned. Officials and media in China have been pleading for American Congressmen to stand down and come to an agreement.
“The clock is ticking,” said Zhu Guangyao, the Chinese Vice Finance Minister, on Monday, according to TIME. “We ask that the United States earnestly take steps to resolve in a timely way the political issues around the debt ceiling.”
It might have felt nice for President Xi Jinping to be the big man at the Asia-Pacific Economic Cooperation (APEC) Summit in Indonesia this week in President Obama’s absence, but China is too concerned to celebrate. Any geopolitical benefit the nation might receive in connection with the U.S. shutdown is far outweighed by the damage a defaulting America would have on the Chinese economy, the Washington Post wrote on Wednesday.
The Communist Party’s staying power is in large part tied to its ability to deliver continued economic growth. If growth slows too much, which is already beginning to happen, it is not quite certain that the political system can survive. The last economic crisis China experienced 24 years ago ended with troops gunning down protesters in Beijing, and the Party is bent on avoiding an event of that proportion.
"After all, the volume and influence of the US economy are unusual,” a People's Daily news story said, speaking to the importance of the welfare of the U.S. economy. “If a gigantic economic entity chooses to look for trouble, it will only add new elements of uncertainty and instability to the world economy, and erect more severe challenges for its full recovery and healthy growth.”
China Concerned U.S. May Default On Treasury Bonds, Huge Impact For Chinese Economy
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