04/08/2011
Whilst markets all around the world breathe a sigh of relief that the US managed to avoid a default on their debts with a last minute deal, China has waded into the super-power for its behaviour and has said that it will be looking to 'diversify' its investments in the future.
The Democrats and the Republicans in the US fought a much-publicised battle over the raising of the debt ceiling, with the Republicans deliberately blocking President Obama's plans, as they did not approve of the proposal to increase some taxes.
Despite an agreement being reached eventually, China has criticised the US for failing to 'defuse Washington's debt bomb' and for its 'madcap farce of brinkmanship.' China also accused the US of failing to properly consider the effect that its actions could potentially have on non-US citizens, claiming their policies could 'jeopardise the well-being of hundreds of millions of families within and beyond the US borders.'
China has the biggest reserves of foreign exchange and is the single largest US Treasuries holder. As such, it stood to lose a lot if the US defaulted, despite assurances their money would be a priority.
The central bank in China has since confirmed that it will be focusing on 'diversifying its foreign currency investments' in order to 'enhance risk management.' In other words, China does not believe that the US has satisfactorily resolved its debt problems and wants to protect itself by spreading the risk around.
Despite the harsh words that China had for the US, it was also the first country to officially respond and welcomed the resolution of the crisis, saying that it would be monitoring the steps that the super-power takes and hopes that the US 'adopts responsible policy measures to properly deal with the debt problem.'
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