BEIJING — China, the largest foreign holder of U.S. debt, issued a scathing condemnation of American economic practices on Saturday, saying that "mounting debts and ridiculous political wrestling in Washington have damaged America's image abroad."
Following the decision by the Standard & Poor's rating agency to downgrade the United States' credit rating a notch from AAA on Friday evening, the editorial on China's official Xinhua newswire warned that Beijing "has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets."
China currently has no other obvious options for the $1.1 trillion-plus that it holds in U.S. Treasury securities, a fact that links Chinese interests to the stability of the dollar and makes the prospect of drastic action by Beijing highly unlikely.
The strong wording of the Xinhua piece, however, suggested a fraying patience.
The editorial began with the line: "The days when the debt-ridden Uncle Sam could leisurely squander unlimited overseas borrowing appeared to be numbered." It ended: "All Americans, both beltway politicians and those on Main Street, have to do some serious soul-searching to bring their country back from a potential financial abyss."
The sharp Chinese rhetoric was a reminder of the complexities of the relationship between the United States and China, which is bound by large economic ties — some $457 billion in total two-way trade last year, for instance — but also given to increased rivalry and suspicion.
As China has expanded its reach in recent years, becoming the world's second-largest economy, securing natural resource contracts across the world and beginning to push for greater military capabilities, many observers have noted a greater willingness in Beijing to publicly upbraid Washington.
In addition to recommending "substantial cuts" to "bloated social welfare costs" in America, the Xinhua editorial pointed to what it characterized as a "gigantic military expenditure."
That echoed remarks last month by China's top general, Chen Bingde, who told a press conference that as America deals with "difficulties in its economy ... it would be a better thing if the United States did not spend so much money on the military." He made those comments while standing next to Adm. Mike Mullen, the chairman of the U.S. Joint Chiefs of Staff.