According to CNBC, in the eyes of China, the biggest foreign holder of US Treasuries, the damage to America's reputation as steward of the world’s safest asset may already be done—even if a last-minute agreement to raise the debt ceiling is hatched. The partisan infighting alone that’s brought the decision to the brink of a default may accelerate China’s diversification away from U.S. assets, investors said.
“They think this is totally crazy and like a bunch of kids in a schoolyard,” said David Riedel of Riedel Research, referring to a conversation he had with a high-ranking government official with the city of Beijing. “They can’t believe we would jeopardize how much value U.S. assets have in terms of safety and security over political bickering.”
Riedel, who makes frequent trips to Asia and whose firm focuses on emerging markets, said these thoughts echo similar comments from executives at Chinese companies as well. “They’re calling me to ask what’s going on,” he said.
China is the largest holder of Treasury securities, according to data from the United States Treasury. However, the country has made hints that it will slowly diversify away from U.S. assets. In October of last year, the country owned $1.18 trillion. “The high-stakes political posturing is a shock to these countries,” said Jina Ventures’ Ron Shah, who said he’s heard the same thing from contacts in India and the United Arab Emirates.... “
Read more at http://www.cnbc.com/id/43885217
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