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:
  • Most Popular
  • Most Shared

DEFENCE

REUTERS SHOWCASE

Intel's Valuation

Intel's Valuation

Intel could rise 30 percent over next two years - Barron's.  Full Article 

Canonisation

Canonisation

Pope declares sainthood of two Indians, four Italians.  Full Article 

Stake Sale Strike

Stake Sale Strike

Coal India trade unions call off strike in victory for Modi.  Full Article 

Interview with Bulgari CEO

Interview: Bulgari CEO

Bulgari CEO: we shouldn’t have left India so we’re back.  Full Article 

Formula One

Formula One

Hamilton takes second F1 title in style.  Full Article 

Available For Remake

Available For Remake

Bollywood finally wants to pay the price for remakes.  Full Article 

Davis Cup

Davis Cup

Vintage Federer seals first Davis Cup for Switzerland.  Full Article 

Reuters India Mobile

Reuters India Mobile

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