China Watches the U.S. Debt Ceiling Drama With Growing Frustration

China is more than a casual observer of the current poltical chaos in Washington. It's also the largest foreign holder of U.S. Treasury bonds, and, if a debt default takes place now or in the near future, China will take one of the largest losses globally.

Early last week, Chinese officials warned the U.S. about its debt default issues and noted the “clock is ticking” when it comes to preventing any further economic damage.

Zhu Guangyao, the nation's vice finance minister, told reporters the People's Republic hoped the problems in Washington would be resolved quickly, to ensure the safety of Chinese investments in the United States. 

"As the world's largest economy and an issuer of the world's major reserve currency," he said, "it is important that the U.S. take credible steps to address its dispute over the debt ceiling in a timely fashion and avoid a default."

“The very fact that more than 60 percent of central banks' reserves are in dollars gives (the Chinese) every reason to be concerned,"  Barry Eichengreen, a former senior policy advisor at the IMF, told The Los Angeles Times. "If the bank in which you held 60 percent of your savings was threatening to default, you'd be concerned too."

As the crisis stretched into its second week without a resolution, China's leadership vented its frustration with the American political system via a commentary published by the state-run Xinhua news agency.

"As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about," it said, "it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

And while the commentary says the debt ceiling crisis is leaving the dollar assets of many nations in jeopardy, "and the international community highly agonized," most experts agree that given euro’s recent instability, the yen’s continual fall in value and that Chinese yuan’s lack of liquidity, there aren't other feasible options at the moment.

Add while it is unlikely the U.S. dollar will lose its position as the universal currency anytime soon, Washington's problems have undermined its credibility -- to the point that,  even if the crisis resolves itself, experts expect foreign investors will start to incrementally diversify their holdings away from the U.S. dollar.