China’s leading credit agency is revolting against the historically stellar credit rating for the US, saying Uncle Sam’s heavy debt load makes it a bigger credit risk than China.
Dagong Global Credit Rating Co., which previously only rated bonds, issued its first set of sovereign debt ratings this week, putting a revolutionary spin on the creditworthiness of 50 nations, including China, Egypt and Germany.
Relying on a “brand new system” that penalizes countries for high levels of indebtedness, and which seeks to correct the perceived biases of its Western competitors, Dagong granted higher marks to an overpopulated, communist China than to the US, France, Britain, South Korea and Japan.
According to Dagong, which says it’s a private, independent company, China deserves a double-A- plus rating with a “stable” outlook, compared to the double-A rating with a “negative” outlook bestowed on the US.
The outlook differs greatly from that of the only other ratings agencies that judge country creditworthiness: Moody’s, Fitch and Standard & Poor’s have all branded the US with the highest possible rating, triple-A.
China’s highest rating by those agencies, by contrast, is a negative double-A rating from Fitch.
The ratings revolt comes as the US financial outlook grows increasingly murky and the reputations of the “Big Three” ratings agencies remain tarnished for having failed to foresee the credit crisis.
Nonetheless, investors say they’re unlikely to start relying on Dagong’s analysis when it comes to assessing the future of the US or any other economy.
“I don’t think anyone cares,” said one hedge fund executive, saying any data out of China is viewed as “sketchy at best.”