China’s prime minister expressed confidence Friday in the US economy as he held talks with visiting Vice President Joe Biden after a historic downgrade of the United States’ top-notch credit rating.
China is the largest foreign holder of US debt, and Biden has used his first official visit to China since becoming vice president to reassure the country’s leaders that their investment remains safe.
Premier Wen Jiabao said Biden’s “clear message” had served to boost investor confidence in the United States, the world’s largest economy, which earlier this month came within days of a devastating default on its debts.
“It is important that you’ve sent a very clear message to the Chinese public that the United States will keep its word and obligations with regard to its government debt,” Wen told Biden at a meeting Friday.
“It will preserve the safety, liquidity and value of US Treasuries. I’m sure that will give a boost to investors’ confidence in the US economy.”
Wen echoed earlier comments by Biden’s Chinese counterpart Xi Jinping, who is widely expected to be named as the country’s next leader in 2012, and who is hosting the five-day official visit.
Xi’s statement that the US economy was “highly resilient” and had a “strong capacity of self repair” was in stark contrast to a barrage of criticism in China’s state-run media.
China, the world’s number two economy, which held around $1.17 trillion in US Treasury bonds at the end of June, watched nervously as a political impasse brought Washington close to default this month.
In a commentary published ahead of Biden’s arrival on Wednesday, the state news agency Xinhua warned that the August 2 debt deal was insufficient to resolve what it called the “runaway debt problem” in the world’s largest economy.
Calling America’s debt a “ticking time bomb,” it urged Biden to “assure Chinese leaders of Washington’s capacity, will and commitment to tackle its fiscal and economic challenges”.
Vice President Xi also stressed the need to restore confidence in the global markets, as stock markets plummeted after a fresh warning that the US and eurozone economies were close to a double-dip recession.
“Destabilizing factors confronting world recovery have intensified, posing new challenges to economic growth and the businesses of our two countries,” he said.
“Under such circumstances, what is most important is to reinforce confidence, as confidence is more precious than gold.”
Xi also said China’s economy — which is shifting towards a greater reliance on domestic demand — would be a boon for the United States, and would not suffer a “hard landing”.
“In the next five years, China is expected to import over $8 trillion of commodities and by 2015, total retail sales are expected to reach 32 trillion yuan ($5 trillion),” he said.
“That will create greater business opportunities for American businesses.”
China and the United States have signed deals worth nearly $1 billion during Biden’s trip, according to a US official who requested anonymity.
His visit is aimed partly at building ties with Xi, who remains virtually unknown in US policy circles, and also comes amid growing concern in the United States about China’s rights record.
Washington this week appealed to Beijing to free prominent rights lawyer Gao Zhisheng, who has defended some of China’s most vulnerable people including Christians and coal miners, and has not been heard of since last year.
As part of the trip, Xi will take Biden to the southwestern city of Chengdu, just 300 kilometres (186 miles) from Daofu county where a monk set himself on fire and died in an apparent protest Monday, sparking a crackdown.
In Chengdu, the two vice presidents will dine at an informal restaurant and Biden will deliver a speech, according to Tony Blinken, the vice president’s national security adviser.
The state-run Global Times newspaper reported Wednesday that the boomtown has already attracted investment from 189 of the Fortune 500 firms.
Biden will then visit Mongolia and close US ally Japan.