The United States must ease Beijing’s worries about its vast US debt holdings, China’s media said on Wednesday, marking a visit by Vice President Joe Biden, who said his hosts should not fret about their dollars or assume American power is waning.
The People’s Daily, the official newspaper of China’s ruling Communist Party, spelled out Beijing’s chief concerns ahead of Biden’s arrival in Beijing on Wednesday evening local time, when he was greeted by senior Chinese diplomats.
China wants Biden to reinforce US assurances that its holdings of dollar assets and US Treasury debt remain safe, despite Standard & Poor’s recent downgrade of the sovereign credit rating of the United States, the paper indicated.
“China, as the biggest foreign creditor of the United States and the largest foreign holder of dollar assets, is naturally more concerned about US policies than others,” said a commentary in the overseas edition of the People’s Daily.
An English-language commentary from China’s official Xinhua news agency amplified that point.
“Biden is expected to assure Chinese leaders of Washington’s capacity, will and commitment to tackle its fiscal and economic challenges,” said Xinhua.
“What Washington should do is shoulder the global responsibility befitting an economic giant,” it said, also urging the United States to “carry out responsible and effective measures to cure its debt addiction.”
Since the Standard & Poor’s ratings downgrade in August, Chinese state media have accused Washington of reckless fiscal policies that have created uncertainty about Beijing’s big holdings of dollar assets.
Analysts estimate Beijing has put about two-thirds of its $3.2 trillion in foreign exchange reserves, the world’s largest, in dollars and is the biggest foreign creditor to the United States.
In an interview done before his arrival in Beijing, Biden told a Chinese magazine, Caijing, that the Obama administration was “deeply committed to maintaining the fundamentals of the US economy that ensure the safety, liquidity, and value of US Treasury obligations for all of its investors.” “This is first and foremost a firm commitment to US citizens, who hold the large majority of all outstanding Treasury obligations and, also, to our foreign investors, including China,” Biden said in the interview published on the magazine’s website.
Despite the downgrade from S&P, one of the three big ratings agencies, investors have poured funds into US Treasuries as a safe-haven amid turmoil in global equity markets and doubts about the strength of European growth.
STAYING OFF THE ROLLER COASTER:
China’s rise has also prompted diplomatic tensions with its neighbors and the United States, long used to being the pre-eminent military power in Asia.
Reflecting that fact, the domestic edition of the People’s Daily said that more than China’s economic interests are at stake in ties between Beijing and Washington. “A healthy atmosphere of practical cooperation between China and the United States will help enhance confidence in coping with global challenges,” said a commentary in the paper. “But whenever the two countries’ relations experience problems, the negative impact is also global,” it said.
“How to avoid roller coaster-like ups and downs is a real issue confronting China and the United States,” it said.
Biden’s visit to China is part of a trip that will then take him to Mongolia and Japan. Washington officials have said that Biden’s priority in Beijing is to forge ties with Chinese Vice President Xi Jinping, who is virtually certain to succeed Hu Jintao as president from early 2013.
Xi will burnish his profile through his several meetings with Biden, as well as through a visit to the United States, possibly early next year. Li Keqiang, who is likely to succeed Wen Jiabao as premier in early 2013, also marked his growing prominence through a visit to Hong Kong. In the first half of 2010, Sino-US relations were unsteadied by disputes over Internet censorship, Tibet and US arms sales to Taiwan, the self-ruled island that Beijing deems an illegitimate breakaway territory.
More recently, the two sides quarreled over how to address rival territorial claims in the South China Sea, where Beijing’s claims overlap with several southeast Asian countries. Tensions in the sea flared in June, setting China against Vietnam and the Philippines, and raising the risk of confrontation with the United States over the disputes.
The Obama administration has stressed its support for a collective regional solution, while Beijing favors addressing each dispute separately. Damage from mishandling those issues would ripple across the globe, said the People’s Daily.
“If the United States ever clashes with China over its core interests, Sino-US relations will undoubtedly experience fresh turbulence,” said the newspaper.
The US debt problems and fractious politics have inspired Chinese commentary declaring that the US is in decline. Biden told Caijing, the Chinese magazine, that the obituaries about waning US strength were wrong. “I’ve been in public service for a long time – 38 years, in fact,” he said. “During that time, many people have said, as some are saying now, that the US is in decline. They were wrong then, and they’re wrong now.”
