China has criticized the United States over its debt limit. The criticism comes after Treasury Secretary Janet Yellen spoke against China’s handling of debt issues in developing countries. The Chinese response came from their embassy in Lusaka, Zambia. In its response, China also accused the U.S. of “sabotaging” attempts by other countries to reduce their debt.
The Chinese embassy stated,
“The biggest contribution that the US can make to the debt issues outside the country is to act on responsible monetary policies, cope with its own debt problem, and stop sabotaging other sovereign countries’ active efforts to solve their debt issues”.
The sour remarks are a contrast to the recent softening of hostilities between China and the US. Last November, the presidents of the two nations met for the first time in years. Moreover, Yellen and her counterparty Liu He held discussions that were deemed successful and healthy.
China is now the largest creditor in the world to developing nations, some of which are dealing with a worsening debt problem. The nation has drawn criticism for what is seen as a lack of participation in a global initiative to lessen the debt loads of developing countries, with Yellen noting repeatedly that Beijing has turned into the largest roadblock to progress.
China worried about American measures?
The U.S. reached its $31.4 trillion statutory debt ceiling on Jan 19. Secretary Yellen said that she would take “extraordinary measures” to aid the government for at least five months. A shutdown can be avoided if Congress has more time to work out their differences and increase the so-called debt ceiling.
The Treasury’s actions allow it some breathing room before it runs out of money for a few months. To prevent a US payments default, which would be financially disastrous for the largest economy in the world and the global financial system, economists and bond-market experts predict that the limit will need to be lifted at some point in the third quarter.
The US faced its most challenging debt limit struggle in 2011. The S&P Global Ratings became concerned enough to downgrade the US’s sovereign rating from AAA. The decision upset markets and ultimately undermined consumer confidence. Moreover, the move hampered the economy’s ability to recover from the financial crisis.