Hopeful for deal on US debt
0 Comment(s)
Print
E-mail
Agencies via Shanghai Daily, July 26, 2011
|
|
|
During a televised address at the White House in Washington, D.C., U.S., U.S. President Barack Obama warns that the nation's burgeoning debt threatens to do "serious" damage to the economy and that Congress must compromise to address future deficitson, Monday, July 25, 2011. [Photo/Agencies] |
China should not worry about stalled United States talks over the debt limit, an adviser to the People's Bank of China said on Monday, predicting that politicians will ultimately reach a deal to avert a crisis.
Xia Bin, a member of the central bank's monetary policy committee, played down near-term risks to China's economy since Washington has little choice but to continue pursuing loose monetary policy in a bid to spur the world's biggest economy.
"Don't worry too much about it. The United States will have to issue more debt and issue more currency," Xia said, adding that the debt talks have gained too much media attention as US politicians try to maneuver on the debt issue to score strategic points before the next presidential election in November 2012.
"They won't betray the national interest. They are now playing with politics," Xia said.
"They will definitely reach a compromise," he said.
As a central bank adviser, Xia is an influential economist but is not directly involved in policymaking.
Prospects of a budget breakthrough faded as lawmakers missed a self-imposed deadline to produce a deal by the time Asian markets opened for the new week.
Moody's, Standard & Poor's and Fitch have said they will downgrade the US credit rating if failure to raise its US$14.3 trillion debt ceiling leaves the Treasury without cash to service its debt obligations in August.
Xia reiterated his earlier views that China should speed up diversification of its rapidly accumulating foreign exchange reserves away from dollar assets to hedge against risks from what he predicted would be a long-term decline for the US currency.
China's reserves, the world's largest, swelled by US$152.8 billion in the second quarter to a record US$3.2 trillion, driven by capital inflows and its large trade surplus.
Chinese officials have pledged to diversify the huge reserves - as much as 70 percent of which are now in US dollar assets, according to analyst estimates.
Separately, Zhu Baoliang, chief economist at the State Information Center, a top government think-tank, said he also expected the US debt impasse to be temporary.
"I think they will reach a compromise. The possibility of a debt default in the United States is not big," he said.
