US Debt Standoff Provokes Ire in China

The threat of US debt default is bolstering China’s desire to lessen the world’s reliance on the dollar, reports Simon Rabinovitch for the Financial Times. Chinese officials and analysts are angry and incredulous about US budget shenanigans, but so far are avoiding public comment or drastic moves. “With $1.3tn invested in US Treasuries, any sudden move to sell those holdings would by itself shake global markets and undermine the value of China’s remaining US assets – the very outcomes that the country’s currency reserve managers want to avoid,” notes Rabinovitch. China is adjusting its portfolio, gradually decreasing dollar assets as a share of its foreign exchange reserves. The artificial debt limit did not restrain US spending, and now a few Republican politicians strangely suggest default may force spending discipline. The US had a stellar record in debt payments, and Treasuries were deemed the world’s safest investment. Credibility takes years to build and could be dashed in a week. – YaleGlobal