China’s economic headwinds could hit region, US treasury deputy says

China’s economic problems are more likely to affect the region than the United States, US deputy treasury secretary Wally Adeyemo said on Monday, a day after US President Joe Biden called China’s economic situation a “crisis”.

Beijing has the resources to deal with its economy short-term but must face longer-term structural economic issues such as demographics and high debt, Adeyemo said in television interviews.

“Those are going to be far harder for them to deal with over time,” he told CNN.

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Biden on Sunday said China’s growth was slowing due to a weak global economy as well as Chinese policies, although he did not cite specific policies. Biden, ending his Asia trip for the summit and a visit to Vietnam to shore up ties, noted China’s issues with real estate and high youth unemployment.

Adeyemo, on CNN, said China’s economy faces “significant headwinds,” adding: “a slowing Chinese economy is going to have an impact, but mostly on their neighbours.”

Asked about the potential for China to sell its holdings in US Treasuries, Adeyemo told CNBC: “I am more concerned about what China’s slowdown means for their neighbours and for Europe, than what it means for the United States given how strong our economy is.”

“The United States is well-positioned to withstand the Chinese headwinds, but the places where you have to be concerned about are their neighbours, countries in Asia, but also a number of countries that have borrowed from China,” Adeyemo told a separate event at the Economic Club of New York. He said the US government was paying close attention to the developments.

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While some of China’s particular decisions will affect specific companies, “when you look at the economy, the United States has some exposure but it’s limited,” he told CNBC.

Adeyemo urged China to open up its economy to the private sector, saying that could boost its economy by creating competition.

“Chinese businesses are able to do business here, sell things to American consumers. We want American businesses to be able to do the same in China on a level playing field,” as well as European businesses, he told CNBC.