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China Daily Website

Biggest foreign holder of US govt debt

Updated: 2013-10-02 11:36
( cntv.cn)

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Along with millions of Americans, the US government closure could also hit China. According to the latest US Treasury data, China remains America's biggest foreign creditor. But despite this, analysts say the impact on China is likely to be limited.

A new test for Sino-US ties, as the US government begins shutting down for the first time in 17 years... with China holding a substantial amount of its debt. US Treasury data shows China remains the biggest foreign buyer of US government debt. Surging to nearly $1.28 trillion in July, ahead of Japan. That's up by $1.5 bilion from its US Treasury holdings in June.

But Republicans and Democrats remain divided on government spending cuts, forcing it's shutdown. Economists say if it remains closed for three weeks, this could knock off 1.4 percent of its GDP, which could hurt Chinese exports and force the US government to taper its stimulus sooner - much of which, has ended up in China.

The US government shutdown comes as China begins it's week long National Day Holidays, so any official reaction is likely to be delayed. But analysts say it's likely to be mild as Beijing remains more focused on boosting business ties with America, than the politics on Capitol Hill.

Professor Liu Bao Cheng, an advisor to China's Ministry of Commerce from the University of International Business in Beijing, says China has taken steps to mitigate economic uncertainty, reducing its reliance on American consumers with new policies to drive domestic consumption... As well as investing more in Southeast Asia and Africa.

Liu Baocheng, Professor, University of Int'l Business, said, "For the Chinese government, I think they have been really accustomed to fluctuations, not only in China but in the whole financial market. So this is a drama, but it's not a shockwave. The managers of the Chinese sovereign fund - I think they are very rational; they are smart business people - after years of experience. And another hope is that given the difficult time of the Federal government, they may get into closer talks to work with China on a number of international issues."

But despite this, the US dollar's recent fall, could force the renminbi to rise, inflating the price of Chinese goods. As a result, it's likely business leaders in China will be closely watching what happens next in Washington.

 

 
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