When President Nixon went on his historic visit to China in 1972, he probably wouldn’t have predicted that within four decades the country then struggling to emerge from decades of disastrous economic policies would be issuing tart statements urging the U.S. to adopt a more responsible fiscal policy, as its biggest creditor.
Or, indeed, that it would have become second only to the U.S. in the sheer size of its economy, with some predicting that it could take over as the world’s largest economy within a decade, as its gross domestic product (GDP) growth—close to 10 percent per year—continues to close the gap.
Yet China has been adopting the role of sensible, savings-savvy maiden aunt to the naughty, debt-ridden U.S. And well she might—after all, China is now Uncle Sam’s biggest foreign creditor, with around $1.2 trillion of U.S. debt.
“China, the largest creditor of the world’s sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets,” a statement from the official news agency Xinhua said in the wake of Standard & Poor’s downgrade of the U.S.’s credit rating.
The statement also condemned the U.S.’s “debt addiction” and “short sighted” political wrangling.
“If the shift in power does happen, the financial crisis has been a demarcation event,” Todd Lee, director of global economics at IHS Global Insight, told CNBC.com.
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