China official paper says U.S. debt worries

The United States' debt woes still threaten the global economy despite a last-minute deal struck by Congress, China's main official newspaper said on Tuesday, nonetheless adding there was no short-term escape from the dominance of the dollar.

The comments were published by the People's Daily, the chief paper of China's ruling Communist Party, in anticipation of a final debt deal reached in Congress between Republicans and Democrats.

"Although the United States has basically avoided default, its sovereign debt problems remain unresolved. They have merely been pushed off, and there is a tendency for them to grow," a brief commentary in the paper said of the U.S. debt deal.

"This has cast a cloud over U.S. economic recovery, and also increased the risks and perils facing the world economy."

Such comments in an official Chinese newspaper do not necessarily reflect the conclusive views of top leaders. But these latest wary comments echo other recent critical remarks in official media from Beijing, worried about its big chest of dollar assets.

The House of Representatives on Monday approved a last-gasp deal to raise the U.S. borrowing limit in a decisive step toward averting a catastrophic debt default by the world's largest economy.

As the largest creditor to the United States, China has repeatedly urged Washington to protect its dollar investments, estimated to account for about 70 percent of its $3.2 trillion in foreign exchange reserves, the world's largest.

But Chinese officials have avoided publicly commenting on the debt showdown in Washington.

The People's Daily said the credibility of U.S. treasury debt had been damaged since the outbreak of the sub-prime mortgage crisis, but other economies still have no way of shaking off dependence on the dollar.

"Although confidence in U.S. debt has suffered a short-term fall, and credit agencies could downgrade its rating, its basic credibility has not altered," said the paper.

It added that "the dollar remains a hard currency that all countries have no choice but to accept." (Reporting by Chris Buckley; Editing by Ken Wills / Daniel Magnowski)