The Rating Agency, Has China been Too Hard with the West?

For now, the three big Western rating agencies still give a AAA rating to the U.S., UK and France. But not the Chinese agency Dagong.

The three major debt rating agencies, Standard & Poor’s, Moody’s and Fitch are only beginning to consider the unthinkable: that the rating of AAA for U.S., UK or France can be challenged. The Chinese agency Dagong Global Credit Rating has passed the stage of warnings. In his eyes, in fact, none of these three countries deserve the highest rating. The United States is tried AA for several months. As for the United Kingdom and France, they were awarded a modest AA-, respectively in late May and early June.

For the Chinese agency, only seven countries can really be described as exemplary: Switzerland, Norway, Australia, Denmark, Luxembourg, Singapore and New Zealand. Even the virtuous Germany is credited as an AA +.

From a purely economic point of view, the Middle Kingdom is not wrong to degrade the note of major Western powers. Given the situation of public finances in these countries, none deserves full marks. And for good reason: the public debt ratio is 96% for the U.S., 83% for the UK and 85% for France in 2011. In countries rated AAA by Dagong, it is just over 40% of GDP. The result is the same for the budget deficit.

Recall that the debt rating of the country normally have an impact on interest rates that may be required of them. Greece, Ireland and Portugal can show how this can be painful. Fortunately for the old Western powers, the Chinese agency has no influence on the markets. Finally, for now …