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Bandar Seri Begawan, Brunei (AFP) Oct 10, 2013
US Secretary of State John Kerry tried Thursday to reassure Asian leaders that Washington would end its political stalemate, after China voiced concern about a possible US debt default.
The spectre of a calamitous default emerged as a major issue at an annual Asian summit in Brunei, held in the absence of President Barack Obama after he was forced to stay home due to the US government shutdown.
China is the biggest foreign holder of US Treasury bonds, worth a total of $1.28 trillion, and its Premier Li Keqiang expressed "concern about Washington's debt-ceiling problem".
Li conveyed that message in talks with Obama's stand-in, Kerry, late Wednesday in Brunei, China's official Xinhua news agency reported.
A US official travelling with Kerry confirmed Thursday that the debt ceiling was discussed, but added Li had vowed continued Chinese investment in the world's largest economy.
"Secretary Kerry made clear that this is a moment in Washington politics and reaffirmed the president's commitment to resolving the issue," the official told reporters.
They also agreed the US economy was one of the world's strongest and pledged to continue the "close economic working relationship".
Kerry and Li joined 16 other leaders in Brunei on Thursday for the East Asia Summit -- wrapping up nearly a week of top-level meetings that began in Bali at the Asia-Pacific Economic Cooperation forum's annual gathering.
As in Bali, Kerry sought to assure leaders in Brunei that Obama's no-show did not signal wavering US interest in the region.
He stressed Washington's "continued commitment to the region" and offered verbal support to allies wary of China's territorial ambitions, according to a copy of his address to the summit.
The crippling budget standoff in Washington forced Obama to abandon plans to visit Asia, where he had hoped to tout his "pivot" towards the region at the back-to-back summits.
That plan took yet another knock on Thursday, when Kerry shelved a visit to the Philippines set for the following day, citing a tropical storm bearing down on the longtime US ally.
Apart from reaching a budget deal to end a government shutdown, Congress must agree by October 17 to raise the $16.7 trillion US borrowing limit.
Failure to do so could see the United States default on its obligations for the first time in its history and spark what the White House warns will be dire global economic consequences.
Emerging economies -- which have already borne the brunt of recent market upheaval over the expected tapering of US monetary stimulus measures -- are particularly anxious to see a breakthrough.
"(If) the world's biggest economy turns belly-up, how can you actually protect yourself?" Philippine President Benigno Aquino told reporters.
"But I don't think that will happen."
With Obama absent from the Asia summits, China has wielded its growing diplomatic and economic clout in the region.
Li offered an olive branch Wednesday to Southeast Asian nations wary of its claims to most of the South China Sea, including waters near the coasts of its neighbours.
He called for peace in the sea -- though China stands firm on its claims -- and for expanded trade with the 10-nation Association of Southeast Asian Nations (ASEAN).
The Philippines, Vietnam, Malaysia and Brunei -- all ASEAN members -- have competing claims to parts of the sea, and Manila and Hanoi have in recent years repeatedly accused China of becoming more aggressive in the dispute.
China has struck a friendlier tone of late, agreeing recently to discuss a code of conduct with ASEAN aimed at preventing conflict in the sea. But some analysts view this as a stalling tactic while it builds up its power.
The US and its allies called in Brunei for accelerated work on the code, with Kerry appearing to prod China over its disputed claims.
"All claimants have a responsibility to clarify and align their claims with international law," his text said.
Aquino called for a resolution on the code of conduct "as soon as possible" while Japanese Prime Minister Shinzo Abe made similar comments.
Myanmar's President Thein Sein shook a ceremonial gavel presented to him as his country formally took on the chairmanship of ASEAN -- and the task of hosting next year's ASEAN and East Asia summits.
The former general has earned international plaudits for reforms but some critics said it was premature to hand Myanmar the gavel, given ongoing rights concerns.
Chinese, European central banks strike currency swap deal
The "bilateral currency swap arrangement" will be valid for three years, the European Central Bank said in a statement on its website.
When Chinese yuan are provided to the ECB, the maximum size of the arrangement will be 350 billion yuan (42 billion euro), the statement said.
It will stand at 45 billion euro when the single currency is provided to the People's Bank of China (PBoC), the statement said.
The PBoC released a similar statement on its website announcing the deal, which it said was agreed Wednesday.
"The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets," the ECB statement said.
The deal is also meant "to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan", it added.
China has taken steps in recent years to increase international trading of its currency and has been working eventually to make it fully convertible for international transactions, though key restrictions remain.
It is convertible for trade purposes, for example, but the government keeps a tight grip on the capital account on fears that unpredictable inflows or outflows could harm the economy -- and reduce its control.
The euro mechanism follows a reciprocal, three-year sterling-yuan currency swap announced in June by the PBoC and the Bank of England, with a maximum value of 200 billion yuan and 21.1 billion pounds.
That deal came on the heels of an initiative launched in April by the City of London to make the British capital a centre for yuan business.
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