News / Asia

Creditors Japan, China Worried About US Shutdown

An employee of the Tokyo Stock Exchange reacts as he watches a stock index board at its headquarters in Tokyo, Japan, August 8, 2011.
An employee of the Tokyo Stock Exchange reacts as he watches a stock index board at its headquarters in Tokyo, Japan, August 8, 2011.
William Ide
Asia’s two biggest economies, Japan and China, are voicing concerns about the ongoing government shutdown in Washington and the possibility that Congress may fail to raise the debt ceiling, leading to a government default. 

Financial leaders there are telling U.S. officials, both openly and in private, about the ripple effect the dispute in Washington could have on their investments in bonds and what that could mean for their own economies.
 
Japanese Finance Minister Taro Aso speaks at the Center for Strategic and International Studies in Washington, Apr. 19, 2013.Japanese Finance Minister Taro Aso speaks at the Center for Strategic and International Studies in Washington, Apr. 19, 2013.
x
Japanese Finance Minister Taro Aso speaks at the Center for Strategic and International Studies in Washington, Apr. 19, 2013.
Japanese Finance Minister Taro Aso speaks at the Center for Strategic and International Studies in Washington, Apr. 19, 2013.
According to U.S. Treasury figures, Japan owns $1.135 trillion in U.S. Treasury bonds and China slightly more at $1.277 trillion.

Speaking at a regular news briefing on Tuesday, Japanese Finance Minister Taro Aso urged political leaders in Washington to resolve the debate before the October 17 deadline, when the United States risks defaulting on its debts.

On Monday, China's deputy finance minister, Zhu Guangyao, urged U.S. leaders to learn from the past, noting the last time the dispute neared the brink in 2011, the credit rating agency Standard and Poor's downgraded the U.S. credit rating.
 

China Vice Finance Minister talks to the media in Los Cabos, Mexico, June 17, 2012.China Vice Finance Minister talks to the media in Los Cabos, Mexico, June 17, 2012.
x
China Vice Finance Minister talks to the media in Los Cabos, Mexico, June 17, 2012.
China Vice Finance Minister talks to the media in Los Cabos, Mexico, June 17, 2012.
"The U.S. knows clearly China’s concerns on the financial stalemate," Zhu said. "China also learned that President Obama and the treasury secretary and other branches of the executive branch know the seriousness of the situation and are taking measures to avoid a default.  However, we have seen the clock is ticking.”
 
Song Hong, an economist at the Chinese Academy of Social Science says it is not just the price of U.S. bonds that will be impacted if the dispute is not resolved.
 
"If the debt is not adjusted then I think that it will have a big hit on the stability of the U.S. bond market, and the U.S. bond market has a direct link with the international status and value of the U.S. dollar," said Song. "This kind of scenario will have repercussions not just for China, but for the whole world economy, because the U.S. dollar is a global currency.”
 
Both China and Japan rely on exports to keep their economies humming and any impact on the value of the U.S. dollar hurts their trading competitiveness. That competitiveness has helped Japan’s Prime Minister boost the Japanese economy in recent months.
 
China too needs economic stability as its growth slows. The country’s new leader Chinese President Xi Jinping is poised to introduce a new wave of economic reforms at a Communist Party meeting next month. Policymakers have been trying to move the country away from its heavy reliance on exports for economic growth.
 
Frederic Neumann, co-head of Asian Economics at HSBC in Hong Kong says the big fear for Chinese policymakers is that with the potential gridlock on Capitol Hill, the potential default could lead to another recession in the United States.
 
The US debt limit:

  • Is the total amount of money the US government can borrow to meet existing legal obligations
  • Obligations include Social Security, Medicare, military salaries, interest on the national debt, tax refunds
  • Raising the debt limit does not authorize new spending commitments
  • Failing to increase the debt limit would cause the government to default on its legal obligations
  • Since 1960, Congress has acted to raise the debt limit 78 times

Source: US Department of Treasury
“And that would hurt China through slowing exports to the U.S. and that is really something that would then require even more stimulus locally to help the Chinese economy sort of to withstand the blow from a U.S. default, and Chinese officials are not terribly keen on adding more stimulus to the economy," he said.
 
Neumann adds, however, that this does not mean that China would be the biggest loser if the default were to happen because it is not the majority holder of U.S. debt.
 
“Most of U.S. debt is still held within the United States by pension funds, insurance companies, banks and so forth, and to the extent that the U.S. government defaults on those bonds, it would hurt American savers just as much as overseas savers," he said. "And therefore it would be an own goal it would be essentially the U.S. shooting itself in the foot, by defaulting on its own debt.”
 
As the standoff moves into its second week and most of the U.S. government remains closed it is unclear if or how soon a breakthrough might be reached. On Monday, the White House said it wants a big enough increase in the debt ceiling now, so it would not have to be raised again until late next year. But spokesman Jay Carney said the White House is not ruling anything in or out when Congress considers how long to raise the debt limit.

You May Like

Australia-Cambodia Resettlement Agreement Raises Concerns

Agreement calls for Cambodia to accept refugees in return for $35 million in aid and reflects Australia’s harder line approach towards asylum seekers and refugees More

India Looks to Become Arms Supplier Instead of Buyer

US hopes India can become alternative to China for countries looking to buy weapons, but experts question growth potential of Indian arms industry More

Earth Day Concert, Rally Draws Thousands in Washington

President Obama also took up the issue Saturday in his weekly address, saying there 'no greater threat to our planet than climate change' More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Are Energy Needs Putting Thailand's Natural Beauty at Risk?i
X
Steve Sandford
April 17, 2015 12:50 AM
Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Are Energy Needs Putting Thailand's Natural Beauty at Risk?

Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Overwhelmed by Migrants, Italy Mulls Military Action to Stabilize Libya

Thousands more migrants have arrived on the southern shores of Italy from North Africa in the past two days. Authorities say they expect the total number of arrivals this year to far exceed previous levels, and the government has said military action in Libya might be necessary to stem the flow. VOA's Henry Ridgwell reports.
Video

Video Putin Accuses Kyiv of ‘Cutting Off’ Eastern Ukraine

Russian President Vladimir Putin, in his annual televised call-in program, again denied there were any Russian troops fighting in Ukraine. He also said the West was trying to ‘contain’ Russia with sanctions. Henry Ridgwell reports on reactions to the president’s four-hour TV appearance.
Video

Video Eye Contact Secures Dog's Place in Human Heart

Dogs serve in the military, work with police and assist the disabled, and have been by our side for thousands of years serving as companions and loyal friends. We love them. They love us in return. VOA’s Rosanne Skirble reports on a new study that looks at the bio-chemical bond that cements that human-canine connection.
Video

Video Ukrainian Volunteers Search for Bodies of Missing Soldiers

As the cease-fire becomes more fragile in eastern Ukraine, a team of volunteer body collectors travels to the small village of Savur Mohyla in the what pro-Russian separatists call the Donetsk Peoples Republic - to retrieve bodies of fallen Ukrainian servicemen from rebel-held territories. Adam Bailes traveled with the team and has this report.
Video

Video Xenophobic Violence Sweeps South Africa

South Africa, long a haven for African immigrants, has been experiencing the worst xenophobic violence in years, with at least five people killed and hundreds displaced in recent weeks. From Johannesburg, VOA’s Anita Powell brings us this report.
Video

Video Sierra Leone President Koroma Bemoans Ebola Impact on Economy

In an interview with VOA's Shaka Ssali on Wednesday, President Ernest Koroma said the outbreak undermined his government’s efforts to boost and restructure the economy after years of civil war.
Video

Video Protester Lands Gyrocopter on Capitol Lawn

A 61-year-old mailman from Florida landed a small aircraft on the Capitol lawn in Washington to bring attention to campaign finance reform and what he says is government corruption. Wednesday's incident was one in a string of security breaches on U.S. government property. Zlatica Hoke reports the gyrocopter landing violated a no-fly zone.
Video

Video Apollo 13, NASA's 'Successful Failure,' Remembered

The Apollo 13 mission in 1970 was supposed to be NASA's third manned trip to the moon, but it became much more. On the flight's 45th anniversary, astronauts and flight directors gathered at Chicago's Adler Planetarium to talk about how the aborted mission changed manned spaceflight and continues to influence space exploration today. VOA’s Kane Farabaugh reports.
Video

Video Badly Burned Ukrainian Boy Bravely Fights Back

A 9-year-old Ukrainian boy has returned to his native country after intensive treatment in the United States for life-threatening burns. Volodia Bubela, burned in a house fire almost a year ago, battled back at a Boston hospital, impressing doctors with his bravery. Faith Lapidus narrates this report from VOA's Tetiana Kharchenko.
Video

Video US Maternity Leave Benefits Much Less Than Many Countries

It was almost 20 years ago that representatives of 189 countries met at a UN conference in Beijing and adopted a plan of action to achieve gender equality around the world. Now, two decades later, the University of California Los Angeles World Policy Analysis Center has issued a report examining what the Beijing Platform for Action has achieved. From Los Angeles, Elizabeth Lee has more.
Video

Video Endangered Hawaiian Birds Get Second Chance

Of the world's nearly 9,900 bird species, 13 percent are threatened with extinction, according to BirdLife International. Among them are two Hawaiian honeycreepers - tiny birds that live in the forest canopy, and, as the name implies, survive on nectar from tropical flowers. Scientists at the San Diego Zoo report they have managed to hatch half a dozen of their chicks in captivity, raising hopes that the birds will flutter back from the brink of extinction. VOA’s George Putic reports.
Video

Video Exhibit Brings Renaissance Master Out of the Shadows

The National Gallery of Art in Washington has raised the curtain on one of the most intriguing painters of the High Renaissance. Mostly ignored after his death in the early 1500s, Italian master Piero di Cosimo is now claiming his place alongside the best-known artists of the period. VOA’s Ardita Dunellari reports.
Video

Video Sidemen to Famous Blues Artists Record Their Own CD

Legendary blues singer BB King was briefly hospitalized last week and the 87-year-old “King of the Blues” may not be touring much anymore. But some of the musicians who have played with him and other blues legends have now released their own CD in an attempt to pass the torch to younger fans... and put their own talents out front as well. VOA’s Greg Flakus has followed this project over the past year and filed this report from Houston.
Video

Video Iran-Saudi Rivalry Is Stoking Conflict in Yemen

Iran has proposed a peace plan to end the conflict in Yemen, but the idea has received little support from regional rivals like Saudi Arabia. They accuse Tehran of backing the Houthi rebels, who have forced Yemen’s president to flee to Riyadh, and have taken over swaths of Yemen. As Henry Ridgwell reports for VOA, analysts say the conflict is being fueled by the Sunni-Shia rivalry between the two regional powers.

VOA Blogs