China calls on US, EU to address fiscal deficit

Expressing concern over downgrading of America's credit rating, China, the largest holder of its debt has asked US and EU to take concrete fiscal and monetary steps and check fiscal deficits to resolve debt problems to maintain global investors' confidence.        

As concerns mounted over likely losses, China as the largest creditor to Washington holding USD 1.6 trillion or about 26% of debt, may suffer following downgrading of US debt, a cabinet meeting headed by Prime Minister, Wen Jiabao took stock of the situation.            
The call was made by the cabinet, after US and European stock markets as well as most Asian stock markets slumped on fears of mounting economic growth and debt strains.       
China supports the joint statement by finance ministers and central bank governors of the Group of 20 on stabilising financial markets, an statement which was the first after Standard and Poor's downgraded the US debt from AAA to AA+ said.           
Relevant nations should work to maintain investment security and stable operation of markets, it said and urged international communities to strengthen cooperation and coordination of macroeconomic controls to push forward strong, sustainable and balanced growth of global economy.    
"The international financial markets are experiencing steep turbulence, and the global economic recovery is facing rising uncertainties and instabilities," the statement said.       
"We have to watch calmly and handle the situation with imperturbation while taking precautions against risks," Xinhua news agency quoted the statement as saying.  It reiterated that China will maintain the continuity and stability of macroeconomic controls and properly handle the balance between managing inflationary pressures, maintaining economic growth and restructuring the economy.    
"(The government) will make efforts to bring down the rise of consumer prices and continue to keep stable and relatively fast economic growth," it said.          
"China's economy continues to develop with a good growth momentum and macroeconomic polices are gradually showing positive effects," it said.    
The National Bureau of Statistics said Tuesday that China's inflation accelerated to a 37-month high of 6.5% year-on-year in July, driven by increasing food costs.    
The agency also said China's fixed-asset investments rose 25.4% year-on-year during the first seven months of the year.       
Industrial value-added output grew 14% and retail sales grew 17.2% in July.      
The People's Bank of China, or the central bank, has so far raised interest rates three times and banks' reserve requirement ratio six times this year to put a lid on price rises.     
The escalating inflation fuelled market expectations of an interest rate hike this month to keep prices in check.   
The inflation pressure also puts the central bank in a tough situation as it tries to tame prices without hurting the country's economy that is facing increasing risks overseas.             
Some economists said the worsening US debt woes may postpone further tightening.           
Lu Zhengwei, chief economist of financial markets at China Industrial Bank, said the government may put further tightening moves on hold and watch closely trends of global financial markets before taking actions.