China decides to rate the world
July 22, 2010

Slamming western credit rating agencies – Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, for being too close to their clients and as a result failing to see risks and predict the financial crisis,  the non-western world’s first credit rating agency from China Dagong Global Credit Rating released its own rating of countries last week.

“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”

In rating 50 countries whose gross domestic product (GDP) accounts for 90 percent of the world economy, Dadong rated China above the United States, Britain, Japan, France and some other Western countries, chiefly due to their worsening deficits. China’s local-currency rating was AA+ and foreign currency rating AAA, according to the Dagong report, both higher than those given by Moody’s, S&P and Fitch. In its report, Dagong rated the US “AA” with a negative outlook both in its local as well as foreign currency.

The Dadong report also evaluated 27 countries differently from how Western rating agencies have been doing. In its report, Dagong gave some emerging and well-performing economies higher ratings than the three Western rating giants did. It also gave a comparatively lower rating to those slow-growing developed countries that have been bogged down in economic and debt troubles.

Post the financial crisis, many Eastern countries have been blaming western credit rating agencies for failing to flag bad debts. A prime example is Spain which received a triple A rating from Moody’s.

An editorial on the  Xihua newswire also laments the fact that China has in the past, been a victim of the three ratings agencies, – the article sites a time when China launched accelerated efforts to list some domestic banks in overseas markets in 2003, S&P turned a blind eye to the country’s fast and sustainable economic growth and announced that it would maintain its BBB-grade rating of the country’s sovereign debt, the minimal level “suitable for investment”. It also gave 13 Chinese commercial banks a junk rating. S&P, together with Moody’s and Fitch, even gave China’s sovereign debt a lower credit rating than debt-plagued Spain.


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