Chinese media attack US over debt battle

Saturday, 30 July 2011 02:11 - - {{hitsCtrl.values.hits}}

BEIJING, (AFP) - Chinese media attacked the United States over its debt wrangling Friday, warning that “irresponsible” lawmakers could depress the value of the dollar, fuel global inflation and plunge the world into another recession.

The United States must raise the $14.3 trillion debt ceiling by August 2 or risk defaulting on its repayment obligations, a move that would send seismic shocks through the global economy.

A default could hurt the US dollar and trigger a “torrential flood” of liquidity into the global economy, fuelling inflation in emerging economies such as China, the Communist Party mouthpiece People’s Daily said Friday.

The report in the paper’s overseas edition followed a stinging commentary by China’s official Xinhua news agency accusing US lawmakers of being “dangerously irresponsible” and warning they risked “strangling the still fragile economic recovery”.

“It is unfortunate and disappointing that when political leaders in Washington spar over who is doing good for their country, they take little account of the world’s economic soundness,” Xinhua said Thursday.

The report underscores growing anxiety in China over the health of the US economy, which is struggling to recover from the global crisis and is now locked in a bitter battle to raise the debt ceiling and avoid default.

China is by far the top holder of US debt with holdings at $1.16 trillion in May, according to the latest US data, and has raised concerns about its investment in the past.

A US default could send the world into a recession “much nastier” than the 2008 crisis, Xinhua said, urging lawmakers to finish “their political jockeying” and “restore international investor confidence”.

China’s foreign ministry last week called on the US to protect investor interests as lawmakers remained at odds over how to slash the country’s deficit and avoid a devastating default. Beijing has previously warned that the massive US stimulus effort launched to revive the economy after the global downturn would lead to mushrooming debt that erodes the value of the dollar and its Treasury holdings.