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Chinese rating agency strips Western nations of AAA status |
China's leading credit rating agency has stripped America, Britain, Germany and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favour of the West.
By Ambrose Evans-Pritchard, International Business Editor
12 Jul 2010
Dagong Global Credit Rating Coused its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to "wealth creating capacity" and foreign reserves than Fitch, Standard & Poor's, or Moody's.
The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia.
Meanwhile, China rises to AA+ with Germany, the Netherlands and Canada, reflecting its ?.4 trillion (￡2 trillion) reserves and a blistering growth rate of 8pc to 10pc a year.
Dominique Strauss-Kahn, chief of the International Monetary Fund, agreed on Monday that the rising East is a transforming global force. "Asia's time has come," he said.
The IMF expects Asia to grow by 7.7pc in 2010, vastly outpacing the eurozone at 1pc and the US at 3.3pc. Emerging nations hold 75pc of the world's $8.4 trillion (￡5.6 trillion) of reserves.
Dagong rates Norway, Denmark, Switzerland, and Singapore at AAA, along with the commodity twins Australia and New Zealand.
Chinese president Hu Jintao said in April that the world needs "an objective, fair, and reasonable standard" for rating sovereign debt. Dagong appears to have stepped into the role, saying its objective was to assess countries using methods that would "not be affected by ideology".
"The reason for the global financial crisisand debt crisis in Europe is that the current international credit rating system does not correctly reveal the debtor's repayment ability," said Guan Jianzhong, Dagong's chairman.
The agency, known in China for rating companies, said its goal is to "correct the defects" of the existing system and offer a counter-weight to Western agencies.
Dagong appears to base growth potential on past performance but this can be misleading, especially in states enjoying technology catch-up. Japan was a high-flyer in 1970s and 1980s before stalling when the Nikkei bubble burst. It has been trapped in near perma-slump ever since.