America's Largest Creditor
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. The Senate will vote on the deal on Tuesday and it will then go to the desk of President Barack Obama.

As the largest creditor to the United States, China has repeatedly urged Washington to protect its dollar investments, estimated to account for about 70 per cent 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."

The official China Daily said Beijing is likely to view the plan as a positive step in restoring investor confidence in the dollar and the U.S. bond market.

"The agreement is likely to avert default by Washington and it certainly is a relief for China," Chen Daofu, a researcher at the State Council's Development Research Centre, was quoted as saying by the newspaper.