Senior Chinese official has warned that the “clock is ticking” to avoid a US default that could hurt China’s interests and the global economy. China, the US’s largest creditor, is “naturally concerned about developments in the US fiscal cliff”, vice finance minister Zhu Guangyao said. Washington must agree a deal to raise its borrowing limit by 17 October, or risk being unable to pay its bills.
He asked that “the US earnestly take steps to resolve” the issue. US Treasury Secretary Jacob Lew has said that unless Congress agrees an increase in the debt ceiling by 17 October, Washington will be left with about $30bn (£18.6bn) in cash to meet its obligations - about half the $60bn-a-day needed. For many governments and investors the approaching deadlock over the debt ceiling is far more critical than the current impasse over the federal shutdown caused by Congress’s failure to agree a new budget. On Sunday Republican House Speaker John Boehner reiterated that Republican lawmakers would not agree to raise the debt ceiling unless it included measures to rein in public spending.
Mr. Zhu said that China and the US are “inseparable”. Beijing is a huge investor in US Treasury bonds. “The executive branch of the US government has to take decisive and credible steps to avoid a default on its Treasury bonds,” he said. “It is important for the US economy as well as the global economy.”
“We hope the United States fully understands the lessons of history,” Mr. Zhu said, referring to a similar deadlock in 2011 that led to a downgrade of the US “AAA” credit rating. That deadlock ended with an eleventh-hour agreement.
On Monday, President Barack Obama said he would not negotiate with Republicans in the House of Representatives “under the threat of economic catastrophe”. He said that he and the Democrats in Congress had already agreed to fund the US government at levels that were favourable to Republicans but lower than preferred by the Democrats. There is little doubt that Mr. Boehner could whenever he wants gather enough votes from moderate Republicans and most all Democrats to reopen the government, says Dick Meyer, BBC executive producer, America.
Mr. Obama called on Mr. Boehner to allow his caucus to “vote their conscience” on a bill that would fund the government. “If Republicans and Speaker Boehner are saying there are not enough votes, then they should prove it,” he said, adding he had a “strong suspicion” there would be enough Republicans to join Democrats in the House of Representatives to pass the bill. “Let the bill go to the floor and let’s see what happens. Just vote.”