Biden visits Beijing to soothe debt fears

The US debt problems and fractious politics have inspired Chinese commentary declaring that the US is in decline [AFP]

Joe Biden, the US vice president, has arrived in China to try to revive his country’s image after a historic debt downgrade and build a relationship with the man expected to be the Asian power’s next leader.

Biden flew into Beijing on Wednesday, where he will meet Chinese leaders including his counterpart Xi Jinping, who is expected to be named as successor to President Hu Jintao next year.

During his five-day visit, Biden will focus on building a working relationship with Xi, but his trip risks being overshadowed by China’s concerns about the safety of its US investments, particularly after a US credit downgrade in earlier this month.

The People’s Daily, official newspaper of China’s ruling Communist Party, said China wants Biden to reinforce US assurances that its holdings of dollar assets and US Treasury debt remain safe, despite Standard & Poor’s recent downgrade of the sovereign credit rating of the US.

“China, as the biggest foreign creditor of the United States and the largest foreign holder of dollar assets, is naturally more concerned about US policies than others,” said a commentary in the overseas edition of the paper.

An English-language commentary from China’s official Xinhua news agency concurred.

“Biden is expected to assure Chinese leaders of Washington’s capacity, will and commitment to tackle its fiscal and economic challenges,” said Xinhua.

“What Washington should do is shoulder the global responsibility befitting an economic giant,” it said,
urging the United States to “carry out responsible and effective measures to cure its debt addiction”.

‘Reckless policies’

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 $3.2tn in foreign exchange reserves, the world’s largest, in dollars and is the biggest foreign creditor to the US.

In an interview done before his arrival in Beijing, Biden told a Chinese magazine, Caijing, the [Barack]Obama administration was “deeply committed to maintaining the fundamentals of the US economy that ensure the safety, liquidity, and value of US Treasury obligations for all of its investors”.

“This is first and foremost a firm commitment to US 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.

The US debt problems and fractious politics have inspired Chinese commentary declaring that the US is in decline. Biden told Caijing, that the obituaries about waning US 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 US is in decline. They were wrong then, and they’re wrong now.”

Lael Brainard, undersecretary of the Treasury for international affairs, said on Monday that Biden would tell China it should focus on its own economic reforms.

Brainard said that the vice president would suggest Beijing let its currency appreciate and shift from a reliance on exports to an economy based on consumer spending.