China slams US over ‘catastrophic’ debt

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Beijing has urged Washington to conduct responsible monetary policy to avoid a default on payments

China has rebuked the US for its brinkmanship over the nation’s “catastrophic debt problem” as Washington approaches a statutory debt ceiling this week that could see the country defaulting on its obligations.

The criticism came from the Chinese embassy in Zambia’s capital Lusaka, following a reproach from US Treasury Secretary Janet Yellen over alleged mishandling by Beijing of a debt problem in the southern African country.

On Monday, during a visit to Zambia, Yellen said that it was critically important to restructure the country’s debt. She blamed China, the key creditor of the African state, for being an obstacle to resolving the problem.

In response, the Chinese Embassy in Zambia said on Tuesday that “the biggest contribution that the US can make to the debt issues outside the country is to act on responsible monetary policies, cope with its own debt problem, and stop sabotaging other sovereign countries’ active efforts to solve their debt issues.”

According to official data, China holds about $870 billion in US debt, down from more than $1.3 trillion in late 2013. The country’s stockpile, the world’s largest after Japan’s, slumped for the third straight month, reaching the lowest level since June 2010, Bloomberg reported.

US debt is currently capped at $31.4 trillion. In December the ceiling was lifted. Last week, Treasury Secretary Janet Yellen warned that “once the limit is reached, the Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations.” She explained that these measures will only go as far as to give Congress time to negotiate and pass a debt-limit hike, most likely until early June.

Economists warn that raising the debt ceiling would give the Treasury some time before it runs out of money, adding that a US default on payments would damage not only the world’s biggest economy but also the global financial system.

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