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China calls on U.S. to live within its means

China, the largest foreign holder of U.S. debt, demanded Saturday that America tighten its belt and confront its "addiction to debts" after Standard & Poor's decision to downgrade the U.S. credit rating.

China owns $1.2 trillion in U.S. Treasury debt, the largest stake of any central bank. The commentary carried by the state-run Xinhua News Agency was Beijing's first official response to Friday's S&P decision.

"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua said.

It said the downgrade would be followed by more "devastating credit-rating cuts" and global financial turbulence if the U.S. fails to learn to "live within its means."

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," it said.

Xinhua said the U.S. must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.

The comments reflect Beijing's desire for Washington to reduce its military presence in Asia. The U.S., rattled by China's military buildup, routinely chides Beijing for its fast-growing defense spending.

Xinhua also suggested a new global reserve currency might be necessary to replace the dollar, a position China has frequently advocated.

"Mounting debts and ridiculous political wrestling in Washington have damaged America's image abroad," it said. "To cure its addiction to debts, the United States has to re-establish the common-sense principle that one should live within its means."

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