'U.S. debt downgrade leaves China in a bind'

from latimes....

"The downgrade of U.S. government debt has put China, the United States' largest creditor, in a tough spot.

Though Beijing has scolded the United States over "its addiction to debts," Chinese officials are caught in a double bind — unable to dump their mountain of U.S. dollars and at the same time getting a tongue-lashing from their own citizens for being Uncle Sam's hapless banker.

The Chinese government has built what is now the world's second-largest economy in part by keeping its currency cheap in order to subsidize exports. To do that, it has bought gobs of U.S. Treasury bills and other securities. Any big move onChina's part to unload its $1.2-trillion-plus trove of American debt would only result in a self-inflicted wound: sinking the value of the dollar further and eroding the value of its own reserves.

For the moment, at least, the economic and political consequences of dumping dollars are likely to keep Beijing from taking any such drastic action"............READ MORE