China agency downgrades US credit rating


BEIJING–A Chinese credit rating agency whose bid to enter the U.S. market was turned down has downgraded the rating of the United States over the Federal Reserve’s stimulus plan, state media said. Dagong Global Credit Rating on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the United States from AA to A+ with a “negative” outlook, the Xinhua news agency reported. The agency said the downgrade reflected the “deteriorating debt repayment capability” of the U.S., according to the report. “The serious defects in the U.S. economy will lead to long-term recession and fundamentally decrease national solvency,” Xinhua quoted Dagong as saying. The Chinese rating agency said the Fed’s plan to inject US$600 billion into the struggling U.S. economy would lead to a further depreciation of the dollar and was “entirely counter to the interest of the creditors.” Beijing has sharply criticized the Fed’s move, with a string of comments from Chinese government officials and state-run media. China and other emerging economies worry that much of the new U.S. money will flood their financial markets, with players seeking higher non-dollar returns. Dagong, one of China’s largest credit rating agencies, gave the Chinese government a higher debt rating than the U.S., Britain and Japan in a sovereign credit risk report covering 50 nations it published in July. In September, it accused the U.S. Securities and Exchange Commission of discrimination and threatened legal action after its application to enter the US market was turned down. Dagong had said it hoped to enter the U.S. market partially in order to protect China’s interest as the largest creditor of the U.S. government, with US$868.4 billion in U.S. Treasury bonds and notes as of end-August.