If America fails to deal with its economic issues, the fiscal cliff will turn into a fiscal abyss. According to China’s Xinhua news agency, America’s politicians need to take a more active role in sorting out its $16 trillion debt. Clearly they are afraid of becoming unpopular by reducing spending and increasing taxes. Instead, they are seemingly ignoring the issue and just getting into more debt. It is for this reason that the abyss is feared.
America’s economic issues are obviously going to impact other countries. One of them is China since around two-thirds of its holdings are invested in American dollar assets. America is also a major export for China. And it’s not just China. There was an increase in stock markets around the world last week. This was due to what the world perceived America did to thwart the rise in taxes and cuts in spending that could have been the straw that broke the economy’s back. But since America has been so near the edge of the financial cliff, it does not bode well for ensuring it will be able to climb out of an abyss.
As a reflection of Chinese administrative thinking, Xinhua also put out a demand to America to “live up to its global economic responsibilities” and pointed out that the reason it was in such a “mess” was because of its badly-functioning political system.