A day after the Greek parliament passed another round of
austerity cuts to stave off the country's financial ruin, the third quarter
economic outlook report released yesterday by the Bank of China is more worried
about the situation
in the U.S.:
The
U.S. sovereign debt problem is more hazardous than the European debt crisis,
economists from Bank of China Ltd. said Thursday in the bank's third quarter
economic outlook, predicting that the U.S. sovereign debt risk will continue to
intensify in the next few years.
U.S.
public debt stood at around 65% of the country's nominal gross domestic product
in the first quarter, exceeding the "safety line" of 60%, according
to the report by one of China's big four banks. The U.S. still hasn't come up
with any effective solutions, and the possibility that it will face a sovereign
debt crisis is increasing, it added.
The op-ed
page of state-owned outlet China Daily contains a
similar message:
... The debt crisis in Europe and
uncertainty in Japan could mean that there will be no strong alternatives to
dollar assets, so it has a great chance that the US might walk away from its
debts and, at the same time, borrow more money from other countries.
Chinese officials have expressed concerns about the
possibility of a U.S. default before. Earlier this month, an adviser to the
People's Bank of China (China's central bank; the Bank of China is one of
China's four major state-owned commercial banks) said that Congressional
Republicans floating the idea of a default were "playing
with fire." Of course, it's no secret that China is the largest
single holder of U.S. debt, with $1.15 trillion's worth of Treasury bonds
in their coffers. But statistics from London-based bank Standard Chartered suggest
that the Treasury buying binge may
be over.
Meanwhile, other revelations from today about China's role
in the U.S.'s looming budget fiasco cast China's recent worries in an amusing light.
A Reuters article suggests that, up to 2009, China was buying up more
U.S. debt than previously disclosed by circumventing Treasury debt auction
rules. Essentially, China would run its deals through third-party brokers to
disguise that its purchases were exceeding the cap set on purchases by single
parties at individual auctions. A change in the debt auction rules in 2009
closed the loophole, and Treasury appears to have made disguise the change as a
"modernization of auction rules," so as not to trouble relations with China.
Those were the days, eh?
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