U.S. "kicks can" towards "fiscal abyss" - China's Xinhua

Reuters Middle East

BEIJING, Jan 2 (Reuters) - The last-minute U.S. deal over

tax increases has fixed one problem, but the world's largest

economy must get to grips with a budget deficit that threatens

not a "fiscal cliff" but a "fiscal abyss", China's Xinhua news

agency said on Wednesday.

The state news agency said in a commentary, issued in

English on its website, that while the United States was clearly

the dominant economic power, it "simply cannot live on borrowed

prosperity forever", and its politicians seemed reluctant to

tackle its total debt of about $16 trillion.

"In a democracy like the United States, tax increases and

spending cuts, the exact dose of medicine needed to cure its

chronic debt disease, have long proved hugely unpopular among

voters," Xinhua said.

"So the politicians have chosen to kick the can down the

road again and again. But as we all know, the can will never

disappear. Sometime and somewhere, you might trip over it and

fall hard on the ground, or in the U.S. case, into an abyss you

can never come out of."

China has a strong interest in a healthy U.S. economy. It

sits on the world's biggest pile of foreign exchange reserves,

worth $3.3 trillion, and as much as 70 percent of the holdings

are invested in U.S. dollar assets, including U.S. Treasuries,

according to analysts.

The United States is also a major export market for China.

Global stock markets rose on Wednesday on relief that the

U.S. had passed measures to avert the huge tax increases and

spending cuts that would have pushed the economy into recession.

However, Xinhua also took aim at U.S. politicians, saying

that if they came so close to falling off a cliff, "they are far

less likely to reach a deal to help their country climb out of

an abyss".

In separate commentaries Xinhua published on Tuesday on the

fiscal cliff debate, it called on the United States to live up

to its global economic responsibilities and also blamed its

poorly functioning political system for the mess


Such commentaries are not policy statements as such, but can

be read as a reflection of Chinese government thinking.

Wednesday's commentary can be found at:

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