Upset that the fiscal stalemate in Washington is threatening the global economy, China called for the U.S. dollar to be replaced as the international reserve currency as well as for broader steps to create a “de-Americanized world.”
China also called for an end to the “pernicious impasse” in the U.S. over the raising of the debt limit and ending the partial government shutdown, saying the world needed another reserve currency so nations could protect themselves “from the spillover of the intensifying domestic political turmoil in the United States.”
Most countries hold their foreign exchange reserves in U.S. dollars because the currency is viewed as the world’s most stable. China is the largest foreign holder of U.S. debt, with about $1.3 trillion in Treasury bonds, and is concerned about the impact of a U.S. failure to raise the debt limit on those holdings.
With Washington politicians still far from a deal as the Thursday deadline for raising the $16.7-trillion debt limit looms, China’s official state-run news agency published a sharply worded editorial Sunday criticizing U.S. leadership.
“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” the Xinhua news agency said in an English-language commentary.
China’s concerns echo those of economic officials around the world about the effects of a failure to raise the U.S. debt limit, which could trigger the federal government’s first-ever widespread default.
Christine Lagarde, head of the International Monetary Fund, told NBC on Sunday that global finance ministers are worried the uncertainty surrounding a U.S. default “would mean massive disruption the world over, and we would be at risk of tipping yet again into a recession.”
The Xinhua editorial took swipes at the U.S. for claiming “the moral high ground” while “covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.”
While slamming the U.S. for the Iraq war and military activity around the world, the article focused much of its fire on the U.S. role in the global economy, saying “the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites.”
“Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” Xinhua said.
Xinhua called for a “a new world order” in which “all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.”
That new order should start with respect for the sovereignty of other nations, the editorial said. It also should include major financial reforms, such as allowing developing and emerging economies to have more say in the operations of the International Monetary Fund and the World Bank, it said.