'China cancels America's credit card'

'China cancels America's credit card'

Thu, 30 Apr 2009 23:09:23 GMT

Representative Mark Kirk

China, wary of the troubled US economy, has 'canceled America's credit card' by cutting down purchases of debt, a US congressman says.

China has the world's largest foreign reserves, believed to be mostly in dollars, along with around 800 billion dollars in US Treasury bonds, more than any other country.

But data from the Treasury Department shows that investors in China have sharply curtailed their purchases of bonds in January and February.

Representative Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had 'very legitimate' concerns about its investments.

"It would appear, quietly and with deference and politeness, that China has canceled America's credit card," Kirk told the Committee of 100, a Chinese-American group.

Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors.

"There will come a time where the lack of Chinese participation may have a significant impact," Kirk said.

With China's economy also hit by the global economic crisis, Premier Wen Jiabao has openly voiced concern about the status of his country's investments in the United States.

China has also floated replacing the dollar as the key international currency with a basket of units bringing in the euro, sterling and yen.

SG/SME/MMA