Context
US Republican legislators considering even a short-term debt default to force deeper cuts in government spending are “playing with fire”, a consultant to China’s central bank warned on Wednesday. Li Daokui said that a default might undermine the dollar and China should dissuade the White House from adopting this approach. The notion of a technical default—fundamentally delaying interest payments for some time—has gained the support of a number of Republicans who believe it is a cost worth paying given that it pushes the government to cut spending. But any type of default may destabilize the world economy and strain already uneasy ties with major US creditors like China, investors and government officials have warned.
