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Kerry reassures Asia amid US shutdown

10 October 2013, 15:07

Bandar Seri Begawan - Secretary of State John Kerry assured Asian nations that the United States was committed to resolving a fiscal impasse as some leaders, including Chinese Premier Li Keqiang, expressed anxiety over the lingering US government shutdown and a possible debt default.

In a meeting on the sidelines of an Asian summit in Brunei, Kerry made clear to Li that the US government shutdown, now in its ninth day, and friction over the US budget "is a moment in Washington politics and reaffirmed the President's commitment to resolving the issue," a senior State Department official said.

The official said the debt issue was "briefly referenced" during the meeting.

China is the biggest holder of US debt and some Chinese officials have raised concerns over a drawn-out crisis in Washington. According to data from the US Treasury, Beijing holds $1.28 trillion of Treasury debt. It also has additional US agency debt.

The US Congress has so far failed to strike a deal to raise the US government's $16.7 trillion borrowing limit, which is set to expire on 17 October, roiling markets and pushing the dollar close to its recent eight-month low against other major currencies.

The budget crisis in Washington already forced President Barack Obama to cancel his planned trip to the Asia-Pacific Economic Co-operation summit in Bali, and the East Asia Summit now underway in Brunei.

Philippine President Benigno Aquino said the country's central bank had begun to take unspecified steps to cushion the potential impact of a default.

"It's like if the world's biggest economy turns belly-up, how can you actually protect yourself? But I don't think that will happen," he told reporters.


Several diplomats expressed concern about the potential impact on the region's economies and markets if the crisis drags on, particularly if there is no agreement to raise the US debt limit, which could trigger a debt default after 17 October.

"The world is worried about it and everyone is bracing for its impact," said a senior indian official, who declined to be identified.

"There is anxiety ... The longer it goes on, the more risks are magnified in the international financial system."

A chink of light emerged on Wednesday when a Republican leadership aide said US House of Representatives Republicans are considering signing on to a short-term increase in the government's borrowing authority to buy time for negotiations on broader policy measures.

How long of an increase might suffice - a few weeks or a few months - was unclear. But agreement by Republicans and Democrats to raise the debt ceiling would at least stave off a possible default after 17 October, when Treasury Secretary Jack Lew has determined the government will no longer be able to borrow.

The 10-member Association of Southeast Asian Nations (Asean) did not discuss the US fiscal issue in formal talks on Wednesday, but diplomats said the issue had come up in informal discussions.

Several Asean economies, including regional giant Indonesia and Malaysia, have seen sharp falls in their currencies in recent months on concerns over an end to the US Federal Reserve's super-easy monetary policy.

"While we want to sound outwardly that we're not concerned about the US, we have to take into account all possible impact to our economy ... The US has to get its act together," said a senior Malaysian diplomat.

"Our central bank is monitoring what's happening in the US, we are in touch with them."

- Reuters


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