WASHINGTON: The United States is pointedly turning the other cheek despite an explosion of criticism of its debt debacle in China’s official media, including a charge its economy is no more than a Ponzi scheme.
The rhetorical barrage has included claims that Washington has shirked its global responsibilities and should feel «shame» about its addiction to debt, in unusually cutting commentaries savaging the world’s largest economy.
Top US officials have avoided responding in kind, careful not to fan the panic which has rocked global markets with a new feud between the White House and the world’s largest holder of Treasury bonds.
But some here see the venom directed at Washington as perhaps a sign of frustration among Chinese officials at the extent to which their huge holdings of US debt make Beijing hostage to a dysfunctional American political system.
Other observers sense a rise in patriotic anxiety among Chinese investors and the wider populace, often bursting out on blogs and the Internet, over Beijing’s policy of piling up foreign exchange reserves.
US Treasury Secretary Timothy Geithner did send a clear signal following Standard & Poor’s decision to downgrade the AAA US debt rating to AA+ on Friday, that there was no sign of China changing its investment strategy.
«They’ve always been very strong and I’m sure they’ll be strong investors in the US going forward, as will investors around the world. I’m very confident in that,» Geithner told CNBC.
Geithner also spoke on Tuesday with China’s Vice Premier Wang Qishan to discuss challenges facing the global economy and the state of global financial markets, a Treasury official said.
US officials have also made the case that despite a political showdown between Obama and Republicans, which drove the United States to the edge of default, and fears of a double dip recession, the United States remains one of the world’s safest investments.
«It’s quite striking that on a day when the market obviously took a real hit, when there was a flight to safety, money went into US Treasury bonds, said President Barack Obama’s budget director Jack Lew on the «Charlie Rose» show on PBS on Monday.
To some extent China, with US bond holdings of $1.2 trillion, is trapped in an embrace with Washington, as any sell off would cause the yuan currency to rise and make its exports more expensive in the United States.
China habitually buys dollars then invests them in Treasuries to hold down the value of the yuan currency which Washington says is artificially low against the greenback and costs US jobs.
It also accumulates dollars by running up trade surpluses.
Source: economictimes.indiatimes.com