China rating agency cuts U.S. credit rating

BEIJING Wed Aug 3, 2011 9:35am IST

An employee of an money exchange counts U.S. dollar bills in Tokyo November 27, 2009. REUTERS/Yuriko Nakao/Files

An employee of an money exchange counts U.S. dollar bills in Tokyo November 27, 2009.

Credit: Reuters/Yuriko Nakao/Files

Related Topics

BEIJING (Reuters) - A Chinese ratings agency on Wednesday downgraded the U.S. credit rating from A-plus to A, saying the deal to lift the debt ceiling won't solve underlying U.S. debt problems or improve its debt-paying ability over the long run.

Dagong Global Credit Rating, a relative newcomer to sovereign debt rating realm and little known outside of China, said in a statement that the U.S. decision to raise the borrowing ceiling will not change the fact that the growth of its debt has outpaced its overall economic growth and fiscal revenue.

It said the deal reached by Congress and signed into law by President Barack Obama may further erode the country's debt paying ability in the coming years, and the agency issued a negative outlook for the United States.

"The rise of the U.S. debt ceiling helped temporarily avoid a debt default but has not improved its solvency and the increasing government debt burden will deteriorated the U.S. sovereign debt crisis," it said in the statement.

Dagong also said that the overall outstanding debt could top the country's gross domestic product by the end of 2012.

Dagong's downgrading puts United States credit several notches below the agency's top rating and on par with creditworthiness for countries such as Spain, Estonia and South Africa.

Its views do not necessarily represent the Chinese government's view, however, its analysis often runs in tandem with statements from government officials.

In its maiden sovereign ratings issued last September, the agency listed U.S. government debt as a bigger risk than that of 11 other countries, including China, while established U.S.-based ratings agencies, such as Standard and Poor's and Moody's Investor Service, have given the United States a top grade and marked China lower.

Moody's on Tuesday reaffirmed its top rating for the United States following the debt reduction deal, but it assigned a negative outlook.

In November, Dagong cut its U.S. rating after the Federal Reserve launched a second round of quantitative easing, echoing the government criticism of the policy, and stated that the ultra loose monetary policy was setting the stage for "a world credit war".

(Reporting by Aileen Wang and Koh Gui Qing; Editing by Ken Wills)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

Coal Mining

Coal Mining

India to open coal to commercial mining firms soon, minister says  Full Article 

RBI Loan Rules

RBI Loan Rules

RBI relaxes overseas loan recast rules   Full Article 

E-commerce Firms

E-commerce Firms

Amazon, e-commerce rivals fuel commercial property boom in India  Full Article 

Growth Forecasts

Growth Forecasts

Indian economic growth forecasts pegged back, despite rate cuts: Reuters Poll.  Full Article 

Uber is Back

Uber is Back

Uber back in Delhi; govt says must await approval.  Full Article 

Markets at Record

Markets at Record

Sensex rises to record after ECB stimulus programme.  Full Article 

Pharma Sector

Pharma Sector

Ipca Labs hit by FDA ban on plant for standard violations.  Full Article | Related Story 

Forex Reserves

Forex Reserves

India FX reserves at record high as RBI fortifies defences  Full Article 

QE for Euro Zone

QE for Euro Zone

ECB launches 1 trillion euro rescue plan to revive euro economy.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage