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Biden reassures China over US debt crisis

Text by News Wires

Latest update : 2011-08-21

US Vice President Joe Biden sought to calm fears over the United States' debt crisis during a visit to China on Sunday, where he reassured an audience at Sichuan University that his government would never default and that China was "safe".

REUTERS - U.S. Vice President Joe Biden on Sunday rejected claims that American power is on the wane and told a Chinese audience that his government would never default, near the end of a trip that has stressed interdependence between the world’s two biggest economies. 

“You’re safe,” Biden told a university in Sichuan, the southwest province that is the second and last stop of his visit to China, in answer to a question about Washington’s ability to repay its debt.
 
“Please understand that no one cares more about this than we do, since Americans own 87 percent of all our financial assets and 69 percent of all our treasury bonds, while China owns 1 percent of our financial assets and 8 percent of our treasury bills, respectively,” Biden said at Sichuan University in the provincial capital, Chengdu.
 
“So our interest is not just to protect Chinese investment. We have an overarching interest in protecting the investment, while the United States has never defaulted and never will default.”
 
Biden used his speech to renew U.S. calls for Beijing to do more to rein in North Korea and Iran, whose nuclear ambitions have alarmed the West.
 
But his key theme was, as it has been throughout his five-day visit to China, economic: that the United States can reverse its high debt and low growth, and that China should play a part by buying more American-made goods and services.
 
“I also know that some of you are sceptical about America’s future prospects. With that in view, I would like to suggest that I respectfully disagree with that view and will allay your concerns,” said Biden.
 
He told the audience to remember that “America today is by far the largest economy, with a GDP of almost $15 trillion, about two and a half times as large as China’s.”
 
Biden and President Barack Obama, both Democrats, face re-election next year. Biden said the debate with Republicans over how to tackle U.S. fiscal problems would be at the heart of the 2012 presidential election.
 
Chinese Vice President Xi Jinping, who is virtually certain to succeed Hu Jintao as Chinese President in early 2013, has been Biden’s host for this visit, and Obama administration officials have said they want to build trust with the emerging leader ahead of the transition.
 
“Nothing to worry about”
 
Sichuan province is a fast-growing example of the inland development that Beijing hopes will power the Chinese economy in coming decades — and also a slice of the rising consumer power that Washington hopes will buy more U.S. goods and reduce a huge trade deficit with China.
 
With 80 million people, Sichuan enjoyed economic growth of 15.1percent last year, according to government statistics.
 
Such economic concerns have dominated Biden’s visit to China, which began on Wednesday, and has featured a succession of unusually vocal declarations of Beijing’s confidence in the U.S. economy, despite Standard & Poor’s recent downgrade of the sovereign credit rating of the United States.
 
China has quarreled with the United States on trade, Internet censorship, human rights and U.S. arms sales to Taiwan.  While those thorny disputes have not disappeared, they appear to have been overtaken by a shared desire to convey a message of confidence and cooperation to a jittery global economy.
 
Biden told Premier Wen Jiabao on Friday that China had “nothing to worry about” over the safety of its vast holdings of Treasury debt, and Wen voiced confidence in the resilience of the U.S. economy, troubled by debt worries and sluggish growth.
 
Wen said he was confident the U.S. economy—which investors fear could slip into recession following a run of poor data—would get back on track for healthy growth. He echoed earlier comments from China’s Vice President Xi Jinping.
 
Chinese officials have sought assurances that Beijing’s vast holdings of dollar assets, including U.S. Treasury debt, remain safe, despite the downgrade. Wen said he noted the reassuring message conveyed by Biden.
 
Analysts estimate two thirds of China’s $3.2 trillion in foreign exchange reserves, the world’s largest, are in dollar holdings, making it the biggest U.S. foreign creditor.
 
China’s Vice President Xi is also due to meet Biden in Chengdu, a city known for its spicy food and panda breeding centre. Biden will fly to Mongolia on Monday morning for a day before heading onto Japan.

 

Date created : 2011-08-21

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