Chinese state media criticises US debt deal

State media in China, the largest holder of US debt, chided the United States on Tuesday over a deal to raise its borrowing limit, saying it was hiding \"risks and troubles\" for the world economy. The US House of Representatives late Monday approved a package that would slash spending in return for raising the legal limit on US sovereign debt, in a bid to avoid a catastrophic default. \"Although the United States has basically avoided default, its sovereign debt problems remain unresolved,\" said a comment piece in the People\'s Daily, a mouthpiece of the ruling Communist Party. \"They are just deferred and there is a tendency for them to grow. This is casting a shadow over the recovery of the US economy and hiding even bigger risks and troubles for the global economy.\" China, sitting on the world\'s biggest foreign exchange reserves of around $3.20 trillion at the end of June, is the largest holder of US Treasuries. The debate over the debt ceiling, which the newspaper labelled a \"political fight\", would hurt the credibility of US Treasuries, though a default was \"essentially unlikely\", it said. The last-minute deal revealed the long-term risks to China\'s massive holdings of US Treasuries, said a separate article in the overseas edition of the People\'s Daily. \"It is necessary to change the current concentration on US dollar assets, but what is more important is to change the trend of increasing holdings of dollar assets in future,\" Li Xiangyang, a researcher at the official Chinese Academy of Social Sciences, wrote in the article. \"This requires a fundamental adjustment in the economic growth model.\" The official Xinhua news agency chimed in by saying the United States remained a \"debt economy\" and the long-term risks of a default still existed. The United States is very likely to let the dollar depreciate to pass off the debt to its creditors, which may cause more flows of speculative funds, or hot money, into emerging economies like China and push up inflation, it said. \"If the US chooses to repudiate debt in this hidden manner, it will seriously impact the stable growth of the global economy,\" Xinhua said, which last week urged the United States to \"live within one\'s means\". State television also criticised the agreement in a rare editorial broadcast on the national evening bulletin on Monday, saying it had more \"pomp and ceremony than substance\". \"The American taxpayer and global debt holders suddenly find out that the debt crisis is only a tool... that the main concern is to get more political capital for the next presidential election,\" China Central Television said. The Chinese government has so far made no official response to the deal to raise to the limit on US borrowing and enact at least $2.1 trillion in spending cuts over the next decade. The Democratic-led Senate was expected to approve the emergency measure in a noon (1600 GMT) vote Tuesday -- scarcely 12 hours before a midnight deadline by which the world\'s richest nation would run out of cash to pay its bills.