- Associated Press - Monday, August 15, 2011

WASHINGTON (AP) — Concerns about the U.S. economy and the country’s ability to manage its debt and deficits loom over Vice President Joseph R. Biden Jr.’s trip this week to China, America’s biggest foreign creditor.

But Obama administration officials are downplaying any suggestions that Mr. Biden will have to reassure the Chinese about America’s creditworthiness. Aides said Mr. Biden will tell Chinese leaders that the U.S. is committed to tackling its fiscal challenges, and he will emphasize aspects of the recent deal to increase the U.S. debt ceiling that the administration believes are good first steps toward long-term deficit reduction.

“The United States has the capacity, will and commitment to tackle our major fiscal challenges,” said Lael Brainard, the Treasury Department’s undersecretary for international affairs.

China, the world’s second-largest economy, owns $1.2 trillion of U.S. Treasury debt, the largest holding by any foreign country. China has called the debate over raising the U.S. debt ceiling a sign of political crisis in Washington and has said that overspending on foreign military adventures was to blame for much of America’s current financial woes.

Despite China’s concerns, financial experts say U.S. economic woes — even with the recent downgrade of the U.S. credit rating by Standard & Poor’s — will unlikely be a deterrent to China’s taking on even more Treasury debt.

U.S. officials previewing Mr. Biden’s trip emphasized that China has its own economic concerns, including an aging workforce and questions about how to transform from an export-driven economy to one boosted by domestic demand.

Mr. Biden also is expected to continue the U.S. push for China to allow its currency to rise in value against the dollar, as well as the currencies of its other major trading partners. Ms.  Brainard said that while China has made some progress on this issue, its currency remains significantly undervalued.

Human rights, Taiwan and Tibet also are expected to be on Mr. Biden’s agenda in China.

Mr. Biden is heading to China at the invitation of Chinese Vice President Xi Jinping. Mr. Biden’s national security adviser, Tony Blinken, said the vice president’s meetings with his Chinese counterpart are part of an effort by the U.S. to build relationships with the next generation of Chinese leaders.

Mr. Biden is due to arrive in Beijing on Wednesday. His four-day trip to China also will include a stop in the southwest China city of Chengdu, where he will visit a high school and deliver a speech on U.S.-China relations.

The vice president also will visit Mongolia and Japan.

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