US debt ceiling crisis: risks still lurk for China despite prospect of deal, analysts say

Beijing is one of the world’s biggest holders of US debt and could be affected by future turmoil in the market and the dollar

The two countries are still linked and an agreement is in both their interests, observer says

Reading Time:3 minutes

US House Speaker Kevin McCarthy says Congress could meet on Wednesday to vote on the debt ceiling deal. Photo: AP

Published: 10:00pm, 28 May 2023

A tentative deal between the White House and Republicans to raise the US debt ceiling could bring temporary relief to the global financial market but there is still the risk of collateral damage, Chinese observers warned on the weekend.

US President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle on Saturday on a deal that is believed to include a two-year debt limit increase and a cap on non-defence spending by the government.

The agreement still needs the approval of lawmakers of both parties before the Treasury is projected to run out of cash to pay its bills on June 5.

McCarthy said he planned to meet Biden again and release the legislative text on Sunday before voting on Wednesday.

The deal is expected to avert an unprecedented credit default that many worry could be catastrophic to a global economy that has already been battered by banking turmoil, prolonged high inflation and fallout from the war in Ukraine.

It would also ease concerns in China where the post-pandemic economic recovery seemed to lose momentum last month.