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Monday
Aug012011

Asia Markets Rally with News of U.S. Debt Deal, but Doubts Remain

Comstock/Thinkstock(BEIJING) -- News of an agreement on a U.S. debt deal was met with a sigh of relief from Asian markets, with Japan and South Korea’s primary indexes up over 1% and the dollar raising sharply against the yen. But for China, the U.S.’s largest creditor, it has been a nail-biting wait. While a doomsday default scenario has likely been avoided, many are asking if the damage is already done; a cursory glance at China’s newspapers and online news forums would seem to indicate that answer is yes.  

One Internet user wrote on Sina.com, "Nations that have U.S. treasury bonds are trapped. It's like a blood transfusion. If you don't do it, it will die and your debt assets will be washed away; but if you go on doing it, you'll be bogged down even further, and in the end your debt assets will still be washed away."

For now, China has little option but to sit tight: any mass selling of their dollar-denominated assets would further weaken the dollar, therefore diminishing the value of their investments.

Copyright 2011 ABC News Radio

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