Beijing: China, the biggest foreign owner of the US treasury securities, on Wednesday asked Washington to handle its debt issue responsibly, warning that any "large fluctuations and uncertainties" would undermine the stability of global financial system and hinder economic recovery.

Reacting to a last-minute debt deal clinched by US President Barack Obama that averted a global economic catastrophe, the Governor of the People's Bank of China, Zhou Xiaochuan welcomed it and noted that the US treasuries had been among the most actively invested and traded instruments in the global market.

"Large fluctuations and uncertainties in this market would undermine the stability of international financial system and hinder global recovery," Zhou said in a statement.

China is the largest foreign holder of US treasury securities, with its combined holding of US government debt topping 1.15 trillion dollars by May.

China also holds the world's largest foreign exchange reserves at USD 3.2 trillion, with about two-thirds of that believed to be invested in US dollars.

Zhou said China hopes the US administration and the Congress would take "responsible" policy measures to handle its debt issue in the light of the interests of the whole
world, including those of the United States.

"It will help ensure safe investment in the US treasuries and the effective functioning of the market. It will also help maintain the confidence of global investors and more broadly
contribute to a strong, sustainable and balanced growth of the world economy, which has been promoted by the G20 leaders," he said.

Zhou's comments came after China's leading credit rating agency today downgraded US sovereign debt after putting it on negative watch last month.

The Dagong Global Credit Rating Company, which lowered the United States to A+ last November after the US Federal Reserve decided to continue loosening its monetary policy,
announced a further downgrade to A, indicating heightened doubts over Washington's long-term ability to repay its debts.

It said the gloomy assessment -- much lower than the AAA ratings given by the so-called "big three" Western agencies Moody's, Fitch and Standard and Poor's -- was inevitable
given the level of market concern generated by the stalemate between Democrats and Republicans over the debt ceiling.

"The squabbling between the two political parties on raising the US debt ceiling reflected an irreversible trend on the United States' declining ability to repay its debts," Dagong Chairman Guan Jianzhong was quoted as saying by CNN.

"The two parties acted in a very irresponsible way and their actions greatly exposed the negative impact of the US political system on its economic fundamentals," he said.

"Our downgrade simply reflects reality," Guan said. "Our rating didn't cause China to lose any money --- it was the inappropriately high ratings for the US by Western agencies
that had led China to make risky investments in US debt."

Meanwhile, the state-run Xinhua news agency, in a terse commentary on the US debt deal, noted that the long tug of war between Democrats and Republicans has failed to defuse
Washington's debt bomb for good and has only delayed an immediate detonation by making the fuse an inch longer.

"The madcap farce of brinkmanship has disclosed yet another ticking bomb in the heartland of the sole superpower in the world -- the crippling tendency to politicise the
economics while trivialising the politics," it said.

(Agencies)