China has called for the world to “de-Americanise” as the deadline for a US default comes dangerously lose.
The official Xinhua news agency said the row was a “pernicious impasse” and that it was time to move away from America with only two days to go for the US Congress to reach a deal.
The rebuke is the sharpest yet to the US from China which owns vast amounts of American debt and is growing anxious at the prospect of a default.
But in Washington, as stock markets slumped, there were some signs of progress in the face of pleas from world leaders including Christine Lagarde, the head of the International Monetary Fund.
US republican senator Susan Collins, who has a key role in negotiations, said yesterday that “we’re making progress towards an agreement but we’re not there yet”.
She refused to disclose any details though she reportedly is working on a six-month extension to buy Congress some time.
Democrat senator Joe Manchin said: “I think we’re 70 per cent to 80 per cent there, putting the extra 20-25 per cent to it”.
As of last night the US government had about $30 billion (£18.7bn) in the bank to pay its bills, but by Thursday that will have run out unless the $16.7 trillion debt ceiling is raised. US social security payments would be suspended, as would pay to US troops and veterans’ benefits, but around the world there will be an economic earthquake.
Larry Fink, chief executive of investment bank Blackrock, warned: “If we do default, this probably will be much larger than Lehman Brothers.”
In its statement, Xinhua said that China was concerned because it is the biggest foreign holder of US Treasury bonds, worth some $1.28tn.
It launched the attack on America and hit out at “such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated”.
Xinhua said: “The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonised.”
Stock markets have become jittery and by lunchtime yesterday the Dow Jones was down 76 points, or 0.5 per cent, and the Standard & Poor’s 500 index was down 8.33, or 0.49 per cent.
The stock market had rallied 460 points on Friday, regaining most of the losses it sustained last week, on false hopes of a deal over the weekend.
Adding to the tension was senate majority leader Harry Reid, a Democrat, who also reportedly made things worse by trying to get new concessions out of Republicans at a time when both sides are playing for the highest stakes.
The ongoing government shutdown is beginning to weigh on the domestic economy. The hundreds of thousands of federal employees temporarily thrown out of work are likely to get backpay when the standoff is resolved. But they are not getting paid now, forcing many to rein in personal spending and cancel holiday plans.
Any agreement that would come in the following days would not resolve disagreements over long-term spending and President Barack Obama’s Affordable Care Act that led to the standoff in the first place.
Many Republicans are now eager to move the discussion away from “Obamacare” and toward possible spending cuts.