Here is a headline anyone will approach with a grain of salt– Chinese credit firm says US worse risk than China.
A Chinese credit-rating firm, Dagong, founded in 1994, rates China and the government debt of 11 other countries as safer than debt from the US. Slow growth and high debt are given as the primary reasons. While the pinch of salt seems legitimate–there may be some pressure from the Chinese government on this–Dagong also makes a decent case for their ratings.
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 U.S. housing market collapsed in 2007.
Manoj Kulkarni, head of credit research for SJS Markets in Hong Kong, said that despite the possibility China’s government might try to influence Dagong’s decisions, there is room in the market for a Chinese agency because Western firms’ credibility is badly tarnished.
China, holding huge amounts of American debt, has strong incentives to encourage stricter controls over US debt and the value of the dollar. If investors world-wide start taking Dagong’s ratings seriously, it may influence US policy.