"The shutdown is not good for business. It's not good for the economy."
- Penny Pritzker, US Commerce Secretary
The U.S. government shutdown entered into the second week, and with no end in sight it is putting growth in the world's largest economy under further threat with each day. While domestic banks are preparing for the capital outflow and business is starting to suffer, Chinese government stressed out the U.S. politicians should hurry with the solution as possibility of the first ever default is threatening the value of Chinese investments in the United States.
The latest data from U.S. Treasury showed that China held $1.28 trillion in U.S. treasuries in July 2013, and this figure can be even higher currently since the world's second largest economy is investing in the U.S. through intermediaries as well. Amid rising concerns of a possible default, Moody's chief executive, Raymond McDaniel claimed the country would not default even if no deal on a debt ceiling is reached before October 17. Even in case of no deal U.S. Treasury will still be capable to pay on Treasury securities, he mentioned.
While pause in the work of the U.S. government is posing significant challenges for other global economies, analysts are cutting their U.S. growth outlook for the October-December quarter. According to the latest projection, the nation's GDP will expand 2% in the last quarter, down from 2.5% expected previously, however, the figure can be even less, depending on the length of shutdown.
© Dukascopy Bank SA