Chinese Sovereign Credit Report Rates U.S. Below China

July 12, 2010
The United States and 17 other nations including Canada, Britain, and France got lower marks from Dagong than from the three U.S.-based credit rating giants Moody's, Fitch and Standard & Poor's.

A Chinese rating agency warned on July 12 that developed countries like the United States faced "big problems" after issuing what it called the first sovereign credit risk report by a non-Western agency.

The report, launched by Dagong Global Credit Rating Co. Ltd on July 11, rated U.S. sovereign debt as more risky than China's.

"We found the economic fundamentals in the major economies... had big problems given that growth in their economy and fiscal income were negative while their debts were growing rapidly," chairman Guan Jianzhong said.

"Moreover, the factors that could enable them to change the fundamentals are not very evident in the foreseeable future," he said.

The report came as China is seeking more influence over world economic policy.

Beijing has repeatedly called for an alternative to the Western agencies, which were blamed for underestimating credit risks that led to the global financial crisis in 2008.

At last month's G20 summit in Toronto, Chinese President Hu Jintao urged "an objective, fair, reasonable and uniform method and standard for sovereign credit ratings" that can better reflect a country's economic strength.

The United States and 17 other nations including Canada, Britain, and France got lower marks from Dagong than from the three U.S.-based credit rating giants Moody's, Fitch and Standard & Poor's.

Meanwhile, nine developing countries including China, Russia and Brazil, received higher ratings from Dagong than from the U.S. agencies.

"The outlook of China's fundamentals is good and its debt ratio is not very high," Guan said.

He also added that China's foreign exchange reserves were the world's largest and said he expected the company's report would greatly reduce China's future borrowing costs.

Dagong rated the local-currency sovereign credit risk for the United States AA with a negative outlook, below the agency's top AAA rating, while China received AA+ with a stable outlook, according to a list on the company's website.

"China is now a creditor nation but its investment and borrowing plans are ... pending (ratings by) a debtor nation such as the United States because its voice was not heard for a long time," Guan said.

A Dagong statement said it was intent on "breaking the monopoly" of the Western agencies. Guan added it hoped to help prevent future debt crises by aligning the use of global credit with countries' ability to pay back debt.

China is the largest holder of U.S. treasury bonds, with 900.2 billion dollars' worth as of the end of April, according to U.S. official figures.

Dagong was founded in 1994. Guan said the company is private, with no connection to the Chinese government.

Copyright Agence France-Presse, 2010

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