China wants Biden to reinforce U.S. assurances that its holdings of dollar assets and U.S. Treasury debt remain safe, despite Standard & Poor’s recent downgrade of the sovereign credit rating of the United States, the paper indicated.
Since the Standard & Poor’s ratings downgrade in August, Chinese state media have accused Washington of reckless fiscal policies that have created uncertainty about Beijing’s big holdings of dollar assets.
Analysts estimate Beijing has put about two-thirds of its $3.2 trillion in foreign exchange reserves, the world’s largest, in dollars and is the biggest foreign creditor to the United States.
In an interview done before his arrival in Beijing, Biden told a Chinese magazine, Caijing, that the Obama administration was “deeply committed to maintaining the fundamentals of the U.S. economy that ensure the safety, liquidity, and value of U.S. Treasury obligations for all of its investors.”
“This is first and foremost a firm commitment to U.S. citizens, who hold the large majority of all outstanding Treasury obligations and, also, to our foreign investors, including China,” Biden said in the interview published on the magazine’s website.
Biden’s visit to China is part of a trip that will then take him to Mongolia and Japan. Washington officials have said that Biden’s priority in Beijing is to forge ties with Chinese Vice President Xi Jinping, who is virtually certain to succeed Hu Jintao as president from early 2013.
Xi will burnish his profile through his several meetings with Biden, as well as through a visit to the United States, possibly early next year. Li Keqiang, who is likely to succeed Wen Jiabao as premier in early 2013, also marked his growing prominence through a visit to Hong Kong.
In the first half of 2010, Sino-U.S. relations were unsteadied by disputes over Internet censorship, Tibet and U.S. arms sales to Taiwan, the self-ruled island that Beijing deems an illegitimate breakaway territory.
More recently, the two sides quarreled over how to address rival territorial claims in the South China Sea, where Beijing’s claims overlap with several southeast Asian countries.
Tensions in the sea flared in June, setting China against Vietnam and the Philippines, and raising the risk of confrontation with the United States over the disputes.
The Obama administration has stressed its support for a collective regional solution, while Beijing favors addressing each dispute separately.
Damage from mishandling those issues would ripple across the globe, said the People’s Daily.
“If the United States ever clashes with China over its core interests, Sino-U.S. relations will undoubtedly experience fresh turbulence,” said the newspaper.
The U.S. debt problems and fractious politics have inspired Chinese commentary declaring that the U.S. is in decline. Biden told Caijing, the Chinese magazine, that the obituaries about waning U.S. strength were wrong.
“I’ve been in public service for a long time – 38 years, in fact,” he said. “During that time, many people have said, as some are saying now, that the U.S. is in decline. They were wrong then, and they’re wrong now.”
Shayne Heffernan
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.