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However, Zheng Xinli, executive vice chairman with the China Center for International Economic Exchanges, a Chinese think tank, said that issuing more currency to repay the debt would be severely frowned upon by creditors like China, since the move would further drive up global commodities prices and transfer the burden to debt holders around the world. Zheng said if the issue continued to deteriorate without legal action, China should urge the US to take a responsible role toward its creditors. "First, the US should cut unnecessary expenses and show an active stance in managing government expenditure. Then, the two parties have to reach an agreement to allow more financial deficit and thus allow a longer period to solve the problem," Zheng told the Global Times. There are several precedents for US government debt hitting the ceiling, but lawmakers eventually raised the limit and the country has not defaulted on its debt since 1933 when Franklin Roosevelt was in office. Zhang Ming, an expert in international finance at the Chinese Academy of Social Sciences, told the Global Times that Congress would eventually reach an agreement on the issue given the domestic pressure it faces. "China's investment abroad mainly lies in US and European treasury bonds, which are facing worsening debt crises. To dodge the risks, the investment should be dispersed to corporate bonds and stocks in developed markets," Zhang said. To reduce its dependence on US bonds, Zheng said China should act faster in internationalizing its currency amid ballooning foreign reserves and escalating debt crisis among Western countries. Agencies contributed to this story |
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