"China, the world's largest holder of US debt, condemned the "short-sighted" political wrangling in the US and said the world needed a new and stable global reserve currency.
In a comment article the official Xinhua news agency said China had "every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets. International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country."
S&P had held back cutting the rating earlier on Friday after the US government reportedly questioned its maths. But the agency insisted it was going ahead with the downgrade to AA-plus, saying the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilise the debt situation.
It is the first time S&P has issued a "negative" outlook on the US government since it began rating the credit-worthiness of railroad bonds in 1860. Michael Hewson, a market analyst at CMC Markets, warned: "This crisis will run and run, and could make Lehmans look like a Tupperware party."
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