{"id":9755,"date":"2011-07-24T18:07:36","date_gmt":"2011-07-24T18:07:36","guid":{"rendered":""},"modified":"2011-07-24T18:07:36","modified_gmt":"2011-07-24T18:07:36","slug":"Asia-is-not-worried-about-US-debt-default","status":"publish","type":"post","link":"https:\/\/asiancemagazine.com\/?p=9755","title":{"rendered":"Asia is not worried about US debt default"},"content":{"rendered":"

The Wall Street Journal<\/a> is reporting that officials in Asian nations with massive stockpiles of U.S. government bonds expressed confidence Washington would reach a debt deal while fretting that a failure to do so could have dire consequences for the global economy.<\/strong><\/p>\n

A U.S. default would trigger major market volatility, raise interest rates, and could “kill off a still-weak economic recovery,”<\/strong> said Zhang Ming, deputy director of the research section for international finance within the Chinese Academy of Social Science, in an essay.<\/p>\n

The most likely scenario, he wrote, is for the U.S. political parties to reach a short-term deal to avoid default.<\/strong> He estimated the risk of default at 10%.<\/p>\n

Xia Bin<\/strong>, an academic adviser to the People’s Bank of China, said the U.S. government “can’t and won’t default” on its debt<\/strong>.<\/p>\n

A senior State Department official noted Monday that China has repeatedly expressed its displeasure at the prospect of a default in private diplomatic settings.<\/strong> China holds $3.2 trillion of foreign-currency reserves. Analysts estimate around 60% of that is in U.S. dollar assets.<\/p>\n

Japan, a staunch U.S. ally with over $1.1 trillion in reserves, much of that in dollars, was more circumspect.<\/strong> Yukio Edano, chief cabinet secretary, said the government is “carefully monitoring” the debt talks “from the political as well as economic perspectives.”<\/p>\n

In South Korea, with over $300 billion in reserves, much of that in dollars<\/strong>, the central bank said it is so confident of a deal it isn’t considering a contingency plan for a possible U.S. debt default, a senior official said today.<\/p>\n

Asian markets paid slight attention to the debt talks Monday, figuring there was still time to strike a deal by the Aug. 2 date the U.S. Treasury has cited as when the government will fall short of its expenditure needs.<\/strong> Analysts at Barclays Capital figure improvement in tax revenue in recent weeks might even extend the breakeven date to Aug. 10.
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