So, from China's viewpoint, why invest in idiots? China is signalling, fix the problems, spend less!
The Financial Times
By Tom Mitchell, Geoff Dyer
and John Aglionby
7 October 2013
The Chinese government has warned the US that the government shutdown and prospect of Washington’s first ever default were threatening the value of its US investments.
In its first official reaction to the US political stalemate over the budget and looming debt ceiling deadline later this month, Beijing said that “the clock is ticking” and urged politicians in Washington to “ensure the safety of the Chinese investments”.
Zhu Guangyao, vice-finance minister, said at a media briefing that “as the two largest economies in the world, China and the US are inseparable”.
The US government shutdown has entered its seventh day with little sign of an immediate resolution. On Sunday, John Boehner, the Republican Speaker of the House of Representatives, declared it was “time for us to stand and fight” over the US budget.
Mr Boehner’s latest comments have unsettled investors with the S&P 500 expected to open lower on Monday, following falls in European and Asian stock markets.
Mr Zhu said China has made clear its unease with the political impasse in Washington with the US administration.
“The US has a large amount of direct investment in China and China has a vast number of US Treasury bonds . . . The US is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”
China held $1.28tn in US treasuries in July 2013, according to US Treasury data, although the true figure could well be higher than this as China also invests through intermediaries. Advisers to the People’s Bank of China, the central bank, have been urging the authorities to diversify the holdings.
However, Raymond McDaniel, chief executive of Moody’s, a credit-rating agency, said he thought the US would not default even if a no deal was struck to raise the debt ceiling before October 17, the US Treasury’s deadline for raising the $16.7tn borrowing limit.
“Hopefully it is unlikely that we go past October 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the US Treasury is still going to pay on those Treasury securities,” he told CNBC on Sunday night.
Later this week, Li Keqiang, the Chinese premier, embarks on a three-nation tour of southeast Asia. Coming just after Chinese president Xi Jinping’s high-profile visit to Indonesia and US President Barack Obama’s decision to pull out of the Apec summit in Bali, Mr Li’s tour of Brunei, Thailand and Vietnam will reinforce China’s growing engagement with the region.
Mr Zhu said that Mr Obama’s absence from this week’s summit was “something that all other parties didn’t want to see [happen]”.
“We hope that the US can draw lessons from history,” Mr Zhu added, noting that a last-minute agreement over the debt ceiling in August 2011 still triggered a downgrade of America’s triple A rating by Standard & Poor’s.
“As the world’s largest economy and an issuer of the world’s major reserve currency, it is important that the US take credible steps to address its dispute over the debt ceiling in a timely fashion and avoid a default . . . We hope that the US economy will be able to overcome the grave challenges it now faces and put an end to such disputes so as to sustain the economic recovery process in the US and for that matter the process of global economic recovery.”
Mr Boehner said the Republican majority in the House would not pass bills to fund the government or increase the debt ceiling unless the Obama administration was willing to make concessions on healthcare and other issues.
He insisted that “there are not the votes in the House to pass a clean CR [continuing resolution]”, a reference to the short-term funding measure with no strings attached that would allow the government to reopen. Mr Boehner also said the debt ceiling would not be increased unless the White House addressed long-term spending and budget issues.
“You’ve never seen a more dedicated group of people who are thoroughly concerned about the future of our country,” Mr Boehner said of House Republicans on ABC television. “The nation’s credit is at risk because of the administration’s refusal to sit down and have a conversation.”
Jack Lew, Treasury secretary, told CNN on Sunday, that Congress was “playing with fire”. “If they don’t extend the debt limit, we have a very, very short window of time before those scenarios start to be played out,” he said, referring to possible cuts in social security and Medicare payments.
He told NBC that by October 17 the Treasury would only have $30bn left to pay its bills. “$30bn is a dangerously low level of cash. And we’re on the verge of going into a place we’ve never been, not having cash to pay our bills,” Mr Lew said.
original article found here
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