China is urging the United States to act quickly to solve its looming debt ceiling crisis, warning despite its relative gains during the federal shutdown that failure to prevent a U.S. default could have disastrous consequences across the global economy.
“As the world’s largest economy and an issuer of the world’s major reserve currency, it is important that the US take credible steps to address its dispute over the debt ceiling in a timely fashion and avoid a default,” Zhu Guangyao, China’s vice-finance minister, told a press briefing on Monday. “We hope that the US can draw lessons from history,” Zhu added, pointing out that even the 2011 deal that led to the sequester still caused a downgrade of the U.S.’ triple A credit rating.
China has so far, many observers have determined, been benefiting geopolitically from the U.S. federal shutdown. The crisis at home led President Barack Obama to remain in Washington rather than travelling to Indonesia to take part in the Asia-Pacific Economic Conference (APEC) this week. This left Chinese president Xi Jinping as the dominant leader at the summit, a role Beijing eagerly stepped into as a way to counter U.S. positioning in the region. “China cannot develop in isolation of the Asia-Pacific, and the Asia-Pacific cannot prosper without China,” Xi told attendees. Chinese premier Li Keqiang will also be taking a tour of Southeast Asia in the coming days, highlighting China’s desire for relationships with the region.
The effect of the shutdown has led to questions about the U.S.’ commitment to a so-called “pivot to Asia,” questions that the administration strenuously rejects. “As we’ve said repeatedly this week, the President believes that America plays an exceptional role in the world, and that politics in Washington should not be standing in the way of exerting American leadership abroad,” National Security Council spokeswoman Caitlin Hayden said in an email to ThinkProgress. “So the unfortunate need to cancel this trip — because Republicans in Congress are undercutting U.S. leadership — sends the wrong message to the world.”
“By all standards, the President and his cabinet have a strong record of engagement in Asia beginning in 2009, and that will continue throughout the rest of his term,” Hayden continued. There are most certainly signs that the Obama administration is doing everything it can to make sure that remains true. On Tuesday morning, the White House announced that negotiations on the Trans-Pacific Partnership (TPP) free trade agreement were on track. Just last week, Secretary of Defense Chuck Hagel was in South Korea, his third trip to Asia in only seven months on the job.
Secretary of State John Kerry likewise managed to lead the U.S. delegation to APEC, even taking part in the traditional dress code that the conference has for leaders. But to have Kerry sit in for Obama in meetings with Xi and Russian president Vladimir Putin isn’t a good piece of optics for the U.S. in a time when it wants to project its ability to lead in Asia.
Despite the intangible benefits Beijing has seen due to the federal shutdown, China is clearly far less excited about the prospect of default. China currently holds about $1.3 trillion worth of debt in the form of U.S. Treasury bonds and American companies are large contributors of direct foreign investment in China. Thus the current rhetoric from lawmakers in Washington, including a growing number of Republicans who now say that breaching the debt ceiling will have no major consequences, has China understandably concerned. The U.S. and Chinese economies are “inseparable,” Minister Zhu hoped to remind officials currently attempting to solve the crisis.
“Because of this, we naturally are paying attention to financial deadlock in the U.S. and reasonably demand that the U.S. guarantee the safety of Chinese investment there,” he said. “As the world’s largest economy and an issuer of the world’s major reserve currency, it is important that the US take credible steps to address its dispute over the debt ceiling in a timely fashion and avoid a default.”