Economy

Chinese credit firm says US worse risk than China

(Agencies)
Updated: 2010-07-12 10:49
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Chinese credit firm declares US worse risk than China in first report on government debt

BEIJING - A Chinese firm that aims to compete with Western rating agencies declared Washington a worse credit risk than Beijing in its first report on government debt Sunday.

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 Washington below China and 11 other countries such as Switzerland and Australia due to high debt and slow growth. It warned the US is among countries that might face rising borrowing costs and risks of default.

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.

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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 United States, 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 Washington, 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 said it hopes to "break the monopoly" of Moody's Investors Service, Standard & Poors and Fitch Ratings. Their reputation suffered after they gave high ratings to mortgage-linked investments that soured when the US housing market collapsed in 2007.

Dagong rated China AA-plus with a stable outlook -- higher than Moody's A1 and S&P's A-plus -- due to 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's stronger ratings for emerging economies echoed market sentiment toward some countries such as China and India. They are seen as better risks than their credit ratings suggest and pay lower rates.