View from China: the Debt Impasse

As the US “steers head on towards a debt ceiling iceberg”, Evan Osnos notes the muted reactions from China and other Asian countries which, he suggests, have “learned to price in American political dysfunction”. From The New Yorker:

Nobody has more skin in this than China, America’s largest creditor, which stands to see its investments suffer if the faces a ratings downgrade and default. Publicly, Chinese officials are playing it cool—“They will definitely reach an agreement,” Xia Bin, an adviser to the Chinese central bank, was telling every reporter who would listen Monday—but that has almost nothing to do with what will actually happen in Washington. The Chinese have their own reasons to be stoic: as the top holder of American Treasuries, Beijing is keen to convey calm to global markets, and it also prudent for domestic political reasons. Chinese citizens and hard-liners are already questioning the wisdom of relying so heavily on in the U.S., so Chinese government financiers have found themselves in the uncomfortable position of defending their bets. Among the top Chinese discussions unfolding Monday on a popular Web forum hosted by the People’s Daily was a string that tied the impasse to a summer-lunch program for American students: “What the hell!” a commentator wrote. “The U.S. owes China God-knows-how-much money and now it’s giving free lunch to its children.” […]

[, speaking in Hong Kong,] tried to put the best face she could on the “political wrangling,” chalking it up to democratic hurly burly. But if anyone in the audience was tempted by , that particular kind of political wrangling was perhaps not the best advertisement.

At The Useless Tree, meanwhile, Sam Crane wonders what tax rates Mencius would set in a modern economy.


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