Chinese ratings agency weighs in on US debt concerns

Jul 14, 2011, 8:41 GMT

Beijing - The Chinese ratings agency Dagong is considering a downgrade of its rating of US national creditworthiness, according to a report it provided to the German Press Agency dpa on Thursday.

According to the assessment, the agency would probably revise its rating of US debt even in the event of an agreement between Congress and the White House, which have been at loggerheads over extending the US debt ceiling ahead of an August 2 deadline.

The Chinese ratings agency said that the US government has no significant policy to reduce the deficit or avoid long-term economic decline.

The report fingered low interest rates, quantitative easing and a preference for risky investments as the main indicators of an unsustainable credit environment.

The US financial tightening plan was not very feasible, and the national deficit was likely to remain as high as 10 per cent for the next two years, it said.

The report concluded that, 'If in the viewing period there is no ... substantial improvement to its capability and will to pay its debt, Dagong will appropriately downgrade the US in credit rating.'

The announcement came after US-based Moody's Investors Service on Wednesday said it was considering downgrading the US national debt from its previously held top rank of AAA.

Dagong in November dropped its rating of the US from AA to A+.

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