08/06/2011 05:15 EDT | Updated 10/06/2011 05:12 EDT

U.S. Debt: China Tells America To Tighten Its Belt, Deal With 'Debt-Addiction'


BEIJING, China - China, the largest foreign holder of U.S. debt, demanded Saturday that America tighten its belt and confront its 'debt-addiction' in the wake of the Standard & Poor's decision to downgrade the U.S. credit rating from AAA.

China currently owns $1.2 trillion of U.S. Treasury debt, the largest stake of any central bank. The commentary carried by the Xinhua News Agency was Beijing's first official response to S&P decision.

It said the rating cut would be followed by more "devastating credit rating cuts" and global financial turbulence if the U.S. fails to learn to "live within its means."

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," it said.

Xinhua said the U.S. must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.

It also suggested a new global reserve currency might be necessary to replace the dollar, a position China has frequently advocated.