According to a report on the Wall Street Journal:
''the U.S. debt problem will continue to deteriorate and the debt level and fiscal deficit will increase,” said Xiang Songzuo, chief economist at Agricultural Bank of China, the country’s third-largest bank by assets. “This is very dangerous (for China).”
Mr. Xiang pessimistically predicted that the world’s largest economy may need to ask its creditors—China included—to erase some of the debt in the future.
China has a total of $3.66 trillion in foreign-exchange reserves, a big chunk of which is in U.S. Treasurys. A drop in the value of the dollar or of U.S. government debt would be painful indeed.
Accelerating the internationalization of China’s currency is vital, the economist said, adding that China’s over-reliance on the dollar is dangerous.
