Thursday, July 14, 2011

Dagong is likely to downgrade US rating

BEIJING- The US' sovereign credit rating is likely to be downgraded regardless of whether the US Congress reaches an agreement on raising its statutory debt limit, Chinese rating agency, Dagong Global Rating Co Ltd, said on Monday.
"If the debt limit is raised and the public debt continues to grow, it will further damage the US' debt-paying ability, which is a key factor in Dagong's evaluation, and we will consider lowering its ratings accordingly," said Guan Jianzhong, chairman and CEO of Dagong.
"If the raised limit fails to pass and the US faces default, the rating will be immediately and substantially downgraded," he said.
According to Guan, the downgrading is really just "a matter of time and extent".
Guan spoke after the US Treasury Department warned that the nation will exhaust its borrowing authority under the $14.29 trillion debt limit on Aug 2 and urged Congress to raise the statutory debt limit "to avoid the catastrophic economic and market consequences of a default crisis".
The three major international rating agencies, Moody's Investors Service Inc, Fitch Inc and Standard & Poor's Financial Services LLC (S&P) each warned in June that they would downgrade the US sovereign credit rating in the event of a default.
The country's rating now stands at A+ in domestic and foreign currency on Dagong's list, with negative outlooks to its future, much lower than the result of the US rating agencies.

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