China state media blasts US over debt downgrade

Chinese state media hit out at the US on Saturday after its unprecedented ratings downgrade, saying the world\'s largest economy needed to cure its \"addiction\" to debt.In a stinging commentary, the official Xinhua news agency said China, the largest holder of US Treasuries, now had \"every right\" to demand Washington address its structural debt problems and safeguard Chinese dollar assets.It is the first time the US has suffered a downgrade and Xinhua said Washington needed to \"come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone\". \"China, the largest creditor of the world\'s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China\'s dollar assets,\" the English-language commentary said.\"To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means.\"Officials in Japan, which has the second-largest US debt holdings, gave a more measured response, saying their trust in US Treasuries remained unchanged, while Australia and South Korea warned against over-reaction.Standard & Poor\'s cut the US rating a notch from the top flight triple-A to AA+ on Friday, saying its politicians were becoming less able to get to grips with the country\'s huge fiscal deficit and debt load.S&P gave a negative outlook for the US, saying there was a chance its rating could be cut again within two years if progress is not made cutting the government budget gap. Friday\'s downgrade followed days of heavy losses on stock markets around the world, as investor confidence was hammered by fears for the US economy and a warning from the head of the European Commission that the eurozone debt crisis had likely spread. But Japanese officials said S&P\'s move would not affect Tokyo\'s approach to investing in US debt.\"The trust we have in US Treasuries and their attractiveness as an investment will not change because of this action,\" an unnamed senior Japanese government official told Dow Jones Newswires.Another official also said that Japan\'s investment policy regarding its foreign reserves remains unchanged, the newswire said.Japan is unlikely to sell any of its dollar-denominated assets as it is fighting to stem the yen\'s rise to near a record-high against the greenback.South Korea held an emergency meeting of senior finance ministry officials on Saturday to discuss possible fallout from the downgrade, but warned against over-reaction. \"There is possibility that South Korea\'s economy might be affected in the short term,\" Vice Finance Minister Yim Jong-Yong said after the meeting.\"However, there is no need to be concerned excessively about our economy and financial markets.\"Australian Prime Minister Julia Gillard also urged a measured response to the downgrade, pointing out that it was not unexpected and the two other key agencies still rated US debt at top grade.\"Standard and Poor\'s had been signalling for some time that unless they saw a certain figure of budget cutbacks out of the discussion that there’s been in Washington about the American budget and fiscal consolidation, that they were intending to do that downgrade,\" she said. \"At the same time, the other two major ratings agencies, Moody\'s and Fitch, continue to have the American economy rated at AAA. So I think people just need to look at all of the facts.\" Xinhua, which on Wednesday slammed the deal to raise the US debt ceiling as failing to defuse the country\'s \"debt bomb\", said on Saturday international supervision \"over the issue of US dollars\" should be introduced.It questioned the dollar\'s status as the world\'s dominant reserve currency, saying \"a new, stable and secured global reserve currency may also be an option to avert a catastrophe called by any single country\".The Philippines\' finance secretary Cesar Purisima echoed the call, saying the downgrade \"highlights the need for alternative global reserve currencies and benchmarks that are more stable and as liquid and convertible.\"In Kuala Lumpur, Yeah Kim Leng, a senior economist with financial research firm RAM Holdings, said he expected Asian market reaction to S&P\'s move to be \"muted\" as the downgrade had already been priced in.\"Of course globally there is greater uncertainty now... There will be some investors who follow a \'triple A\' credit rating who need to sell-off... So the market will see some adjustments,\" Yeah told AFP.He said he expected Asian countries to hold on to their US dollar reserves amid \"few available alternatives\", describing Asia as a \"relative sea of stability\" compared to the volatile European and US markets.