China slams US over debt after S&P rating cut

Aug 6, 2011, 8:42 GMT

Beijing - China slammed the United States for its debt problems Saturday, questioning whether the US dollar should remain the world's reserve currency.

The comments came hours after the Standard & Poor's ratings agency stripped the United States of its AAA credit rating, the highest level possible. The United States had enjoyed that rating since 1941.

A strongly worded commentary published by the official Xinhua News Agency called for 'international supervision' of the issuance of US dollars and the consideration of alternatives to the dollar as the world's global reserve currency.

Commentary from Xinhua often reflects government policy.

'America has to pay for its debt addiction and the short-sighted political wrangling in Washington,' the commentary read.

As the largest creditor to the world's sole superpower, China 'has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets,' it added.

The US should 're-establish the common sense principle that one should live within its means,' it said.

Further rating cuts will follow if the US does not rein in its 'gigantic military expenditure and bloated social welfare costs,' it added.

S&P cut the US rating to AA-plus on Friday on concerns over budget deficits and rising debt. The move will likely cause an increase in the cost of borrowing for the US government, US companies and consumers.

The two other main ratings agencies, Moody's and Fitch, have so far kept their AAA rating for the United States, though Moody's has warned of a 'negative outlook.'

Earlier in the week, the United States avoided a default on its debt after lawmakers reached bipartisan agreement on raising the country's debt limit. Agreement came after weeks of heated debate.