China Urges U.S. To Act Responsibly On Debt

The New York Times reports:

China, the United States’ biggest creditor, urged the U.S. government on Thursday to act to protect investors’ interests, highlighting rising concerns around the globe about the protracted budget talks taking place in Washington.

U.S. policy makers are locked in tense negotiations over the government debt limit, which the Obama administration says must be raised from its current level of $14.29 trillion to allow the government to pay its daily bills and service any debt coming due. Any failure to pay debt coming due would effectively amount to a default, which, however brief, could shake confidence in the U.S. economy and severely unsettle global financial markets.

The ratings agency Moody’s sharpened attention on that scenario late Wednesday when it warned that it might cut its top-notch rating for the United States. Moody’s cited a “rising possibility” that no deal would be reached before the U.S. government’s borrowing authority hits its limit on Aug. 2.

Also Wednesday, the Federal Reserve chairman, Ben S. Bernanke, warned of a “huge financial calamity” if President Barack Obama and the Republicans cannot agree on a budget deal that allows the debt ceiling to be raised.

The authorities in Beijing added their voice of concern Thursday — albeit in more muted terms.

“We hope that the U.S. government adopts responsible policies and measures to guarantee the interests of investors,” Reuters quoted a foreign ministry spokesman, Hong Lei, as saying. Mr. Hong was speaking at a regular news briefing in Beijing, and was responding to questions about the Moody’s report.