As the partial shutdown continues in Washington, the world's biggest economy is facing another looming crisis. The first US sovereign default could become a reality if Congress fails to reach an agreement to raise the debt limit by October 17th. However, negotiations on Capitol Hill appear to be going nowhere as Republicans insist on defunding the president's signature healthcare initiative, Obamacare.
China's Vice-Minister of Finance Zhu Guangyao on Monday warned Washington that "the clock is ticking" to reach a compromise and urged US officials to ensure the safety of Chinese assets.
In China's first official reaction to the US government closure and looming debt ceiling deadline, Vice-Finance Minister, Zhu Guangyao, has urged Washington to ensure the security of China's vast US treasury holdings, saying the two economies, are now inseparable.
"As the world's largest economy and the issuer of the major reserve currency in the world, it is important for the U.S. to maintain the creditworthiness of its Treasury bonds." Zhu said.
According to a report published by the Xinhua news service, Vice minister Zhu also said:"On the question of the debt ceiling, the Chinese side feels the U.S. needs to take realistic and resolute steps to ensure against default on the national debt."
As of July, US Treasury data showed China owned 1.28 trillion US dollars in US treasuries - making it America's biggest foreign creditor. But if China decides its investment is no longer safe and stops buying US treasury securities, Washington may need to find other investors.
Reporter:"According to US Treasury Secretary Jacob Lew, unless Congress agrees on how to raise the debt ceiling by October 17th, Washington will have just $30bn in cash to meet its obligations - about half the $60bn-a-day needed to make repayments to its creditors, including China."
But a default isn't China's only risk in America. With 800 thousand US government workers not getting paid, their buying power for Chinese products is now significantly reduced - which could already be proving a major blow for manufacturers in the world's second largest economy.
