US is not AAA in new Chinese-made ratings
By Joe McDonald |
July 12, 2010, Monday
|
Print Edition
Print Edition
A CHINESE firm that aims to compete with Western rating agencies declared the United States a worse credit risk than China in its first report on government debt yesterday.
Dagong International Credit Rating Co's verdict was a break with Moody's, Standard & Poors and Fitch, which say US government debt is the world's safest.
Dagong said it rated the US below China and 11 other countries, including Switzerland and Australia, because of high debt and slow growth. It warned that the US is among countries that might face rising borrowing costs and risks of default.
The report comes amid complaints by Beijing that Western rating agencies fail to give China full credit for its economic strength, boosting borrowing costs - a criticism echoed by some foreign analysts. At June's G20 summit in Toronto, President Hu Jintao called for the creation of a more accurate system.
Dagong, founded in 1994 to rate Chinese corporate debt, says it is privately owned and pledges to make its judgments impartially.
Dagong's chairman, Guan Jianzhong, said the current Western-led rating system is to blame for the global crisis and Europe's debt woes. He said it "provides the wrong credit-rating information" and fails to reflect changing conditions.
"Dagong wants to make realistic and fair ratings," he said.
Dagong's report covered 50 governments and gave emerging economies such as Indonesia and Brazil better marks than those given by Western agencies, citing high growth.
Along with the US, some other developed nations such as Britain and France also received lower ratings than those of other agencies.
Dagong rated US government debt AA with a negative outlook, below the firm's top AAA rating. It warned that the US, along with Britain, France and some other countries, might have trouble raising more money if they allow fiscal risks to get out of control.
"The interest rate on debt instruments will run up rapidly and the default risk of these countries will grow even larger," its report said.
Dagong rated China AA-plus with a stable outlook - higher than Moody's A1 and S&P's A-plus - because of rapid growth and relatively low debt.
Ahead of it were seven countries including Switzerland, Australia and Singapore that received the top rating of AAA, the same as those from Western agencies. Canada and the Netherlands also ranked above China.
Dagong said it hopes to "break the monopoly" of Moody's Investors Service, Standard & Poors and Fitch Ratings. Their reputations suffered after they gave high ratings to mortgage-linked investments that soured when the US housing market collapsed in 2007.
Manoj Kulkarni, head of credit research for SJS Markets in Hong Kong, said there is room in the market for a Chinese agency because Western firms' credibility is badly tarnished.
Dagong International Credit Rating Co's verdict was a break with Moody's, Standard & Poors and Fitch, which say US government debt is the world's safest.
Dagong said it rated the US below China and 11 other countries, including Switzerland and Australia, because of high debt and slow growth. It warned that the US is among countries that might face rising borrowing costs and risks of default.
The report comes amid complaints by Beijing that Western rating agencies fail to give China full credit for its economic strength, boosting borrowing costs - a criticism echoed by some foreign analysts. At June's G20 summit in Toronto, President Hu Jintao called for the creation of a more accurate system.
Dagong, founded in 1994 to rate Chinese corporate debt, says it is privately owned and pledges to make its judgments impartially.
Dagong's chairman, Guan Jianzhong, said the current Western-led rating system is to blame for the global crisis and Europe's debt woes. He said it "provides the wrong credit-rating information" and fails to reflect changing conditions.
"Dagong wants to make realistic and fair ratings," he said.
Dagong's report covered 50 governments and gave emerging economies such as Indonesia and Brazil better marks than those given by Western agencies, citing high growth.
Along with the US, some other developed nations such as Britain and France also received lower ratings than those of other agencies.
Dagong rated US government debt AA with a negative outlook, below the firm's top AAA rating. It warned that the US, along with Britain, France and some other countries, might have trouble raising more money if they allow fiscal risks to get out of control.
"The interest rate on debt instruments will run up rapidly and the default risk of these countries will grow even larger," its report said.
Dagong rated China AA-plus with a stable outlook - higher than Moody's A1 and S&P's A-plus - because of rapid growth and relatively low debt.
Ahead of it were seven countries including Switzerland, Australia and Singapore that received the top rating of AAA, the same as those from Western agencies. Canada and the Netherlands also ranked above China.
Dagong said it hopes to "break the monopoly" of Moody's Investors Service, Standard & Poors and Fitch Ratings. Their reputations suffered after they gave high ratings to mortgage-linked investments that soured when the US housing market collapsed in 2007.
Manoj Kulkarni, head of credit research for SJS Markets in Hong Kong, said there is room in the market for a Chinese agency because Western firms' credibility is badly tarnished.
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