Facing dilemma over the fate of its $1.16 trillion American bonds in light of debt downgrade, China, the largest investor in US treasury securities, today said it is “fully confident” about the economic recovery of the United States.

China’s confidence in sagging US economy was conveyed to visiting Vice President Joseph Biden when the American leader met Chinese Premier Wen Jiabao here.

The US economy will overcome its difficulties and return to prosperity, Wen was quoted as saying by official Xinhua news agency.

“The prosperity and stability of the United States are important for the whole world,” Wen said, as Biden conveyed a “very strong determination” to enhance Sino-US relations.

“You have clearly told the Chinese people that the United States is committed to preserving the integrity of its public debt, including its safety, liquidity and inflation-resistance, which will undoubtedly enhance investors’ confidence,” he said.

China remains the largest foreign holder of the US debt at the end of June, holding about $1.16 trillion of its total $3.5 trillion in US Treasury securities.

Biden said the US will ensure the safety of its debt not only for the sake of China, but also for American citizens, who own 85 per cent of the country’s total debt.

Biden began his six-day official visit to China on Wednesday. His visit comes on the heels of an unprecedented downgrade of the US’ credit rating earlier this month, which has created global uncertainty about the safety of dollar assets.

Earlier, Chinese Vice President Xi Jinping told Biden that he believes the US economy will improve by addressing current challenges.

“The US economy has always been resilient and capable of repairing itself,” Xi said as he joined Biden in the China—US Business Dialogue, which was held here yesterday.

“I hope that Chinese and US entrepreneurs will judge the situation appropriately, remain confident and turn challenges into opportunities,” Xi said.

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