October 8, 2013

China to US: Raise your debt ceiling.

Make no mistake, China is America's geo-political adversary of the 21st century.  There are no scenarios in the Chinese mindset that equate to a win-win with the United States and China both benefiting from the relationship.  So when China gives advice like this, you have to wonder not about the short term implications of their statements, but rather the long term ones;
The Chinese Vice Foreign Minister, Zhu Guangyao, told America’s deadlocked politicians on Monday that “the clock is ticking” and called on them to approve an extension of the national borrowing limit before the federal government is projected to run out of cash on 17 October.

“We ask that the United States earnestly takes steps to resolve in a timely way the political issues around the debt ceiling and prevent a US debt default to ensure the safety of Chinese investments in the United States,” Mr Zhu told reporters in Beijing. “This is the United States’ responsibility,” he added.
China clearly has to protect its investments, there's no issue with them wanting to protect their holdings.  But a debt default is not really at risk.  The real concern when China wants you to raise your debt ceiling is that you know that they know it weakens the United States in the longer term.  China also has to know that they are under no real short term risk.  The U.S. will not default on it's debts. Doing so would be catastrophic.
So China is playing the long game, wanting to do what it can to undermine U.S. power down the road and supplant them as the single global superpower.  It's all the more reason to get your fiscal house in order.   I doubt however that will happen anytime soon.  So as we speak, China, suggestions are not, are still winning.  and the United States keeps losing ground.

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