Is the US a bigger debt risk than Russia and Botswana? A Chinese rating agency thinks so
In comments thought to reflect Beijing’s views, Dagong Global says outlook for US negative as tax cuts worsen repayment capacity
A Chinese credit rating agency has cut its outlook and rating for the United States to BBB+, putting the debt repayment capacity of the world’s biggest economy below that of Russia and Botswana and on a par with Colombia and Peru.
Beijing-based Dagong Global said it was cutting the US’ rating from A- and giving it a “negative outlook” because of the US federal government’s declining capacity to repay debt, a situation worsened by tax cuts.
While Dagong is not directly controlled by the Chinese government, it has argued that the Western system dominated by Moody’s, Standard & Poor’s and Fitch Rating is flawed and China must have its own voice in the industry.
Few international investors track Dagong’s assessments but they are understood to partly reflect the views of the government, the largest holder of US Treasury bills.
Moody’s and S&P enraged Beijing last year when they downgraded China’s sovereign credit rating. In apparent retaliation, China’s Ministry of Finance did not hire any rating agencies when it sold US$2 billion in bonds in Hong Kong in October.