News / Economy

Chinese Rating Agency Cuts US Sovereign Credit Rating

FILE - A photo illustration shows a $100 banknote placed above Chinese 100 yuan banknotes in Beijing.
FILE - A photo illustration shows a $100 banknote placed above Chinese 100 yuan banknotes in Beijing.
Reuters
A Chinese ratings agency cut its credit rating for U.S. sovereign debt by one notch to A-minus from A on Thursday, saying a deal struck by Congress to raise the government's borrowing ceiling failed to solve the cause of its debt problem.

Dagong Global Credit Rating said that the temporary fix of the debt issue would not defuse the fundamental conundrum of the U.S. fiscal deficit or improve repayment ability in the long-term, but could trigger defaults at any time in the future.

“The deal means only an escape from a debt default for the time being, but hasn't changed the fact that the growth of government borrowing has largely outpaced overall economic growth and fiscal revenues,” China's biggest home-grown ratings agency said in a statement.

The U.S. Congress on Wednesday approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a historic debt default that could have threatened financial calamity.

Dagong said the increase in the debt ceiling, for the fifth time since President Obama took office in 2009, provided further proof of the U.S. government's inability to make improvements to fiscal fundamentals that were needed to enhance its debt servicing capability.

It said it held a negative outlook for the United States, noting that the Federal Reserve continued to inject dollars into the market through quantitative easing policies, eroding the value of the outstanding debt and hurting creditors' interests.

The downgrade put the United States several notches below Dagong's top rating and on par with Brazil, Israel and Panama, among others.

Dagong's ratings are barely watched outside of China, and major international credit agencies classify most countries very differently from the Chinese agency.

Dagong estimated that the U.S.'s foreign creditors could have suffered an estimated loss of $628.5 billion between 2008 and 2012 due to a weakening of the U.S. dollar.

China, sitting on the largest stockpile of foreign exchange reserves in the world, is the biggest holder of U.S. treasuries.

Dagong's views do not necessarily represent the Chinese government's stance, however, its analysis often runs in tandem with remarks from government officials.

China's Vice Finance Minister Zhu Guangyao had earlier urged the U.S. government to take “concrete steps” to resolve the fiscal cliff issue and meet its responsibility to uphold stability of international financial markets.

A commentary on the official Xinhua news agency on Thursday took the two main U.S. political parties to task for “brinkmanship”.

“The saga in Washington is teaching America's creditors a lesson: U.S. politicians are ready to fight each other at the expense of debt-holders' interests and U.S. Treasury bonds may no longer be safe investment,” the commentary said.

The commentary does not reflect official policy but is an insight into views held at the top levels.

Fitch Ratings said on Tuesday it had placed a negative outlook over its AAA rating for the United States due to the political brinkmanship. Moody's Investors Service rates the United States at Aaa, while Standard & Poor's rates it at AA-plus.

You May Like

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Obesity Poses Complex Problem

Professor warns of obesity’s worldwide health impact More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam Wari
X
Katherine Gypson
May 25, 2015 1:32 AM
For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.