China Says U.S. Downgrade ?Overdue,? Calls for Global Reserve Currency

China was quick to jump on Standard and Poor's (S&P) historic downgrade of U.S. debt.

In a scathing editorial, China's official press agency Xinhua News said the downgrade was an "overdue bill that America has to pay for its own debt addiction and the short-sighted political wrangling in Washington."

It said the U.S. spent too much on military and social welfare programs, lived beyond its means, and should expected more downgrades if no substantial reforms are enacted.

"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," said Xinhua.

It also called for the international supervision over the issue of U.S. dollars and raised the possibility of a "new, stable, and secured global reserve currency."

Ever since the aftermath of the global financial crisis - which saw the simultaneous ballooning of U.S. debt and the rise of China on the international stage - China has aggressively attacked U.S. monetary and fiscal policy.

It lashed out at the Federal Reserve's QE2, which it claimed put "excessive liquidity on emerging markets." China's state-approved ratings agency Dagong, moreover, said QE2's debt monetization "entirely encroaches on the interests of the creditors," of which China is the largest.

In 2009, China's central bank governor Zhou Xiaochuan proposed the creation of a global reserve currency "that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies."

Zhou suggested the IMF's special drawing rights system as the basis of this new global currency.

Moreover, China has already struck up agreements to begin to cut the U.S. dollar out of its bilateral trade with Russia and Malaysia.

China has been early and vocal in warning the U.S. on its undisciplined spending. Now, more and more entities - including U.S.-based S&P - are starting to agree.