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Cary Huang

If you don't like the rating you get, get another rater. 
And that's exactly what Beijing has done. Dagong Global Credit Rating Co, a little-known Chinese rating agency, has given its own government a higher debt rating than the US, Britain  and Japan in its first sovereign ranking report of credit ratings for the world's major economies. And although Dagong may not be up there with the big boys like Moody's Investors Service or Standard & Poor's, it is already getting top marks from Beijing.
Its report evaluating 50 countries, coincides with a push by China to boost its influence in global markets. 
State-run media have hailed Dagong's report as a landmark step by the first non-Western rating agency to assess the world's sovereign credit and risks.
The firm said yesterday it rated US government debt AA with a negative outlook, and China AA-plus with a stable outlook. China's rating for yuan debt is higher than Japan's and Britain's  AA-minus. Norway, Denmark and Switzerland were among the top seven countries with the highest 'AAA' ratings.
The foreign-currency rating of China, which has US$2.45 trillion of reserves, is the top-ranked AAA, the agency said, without giving details of its ranking system.
Dagong's rating of 27 countries differed markedly from Moody's Investors Service, Standard & Poor's and Fitch Ratings, the statement said. Dagong's China rating is higher than Moody's A1 rating for China, which is four notches below Moody's Aaa US rating. S&P rates China A-plus. 
'You have got to start somewhere,' said Tim Condon, chief Asia economist with Singapore-based ING, welcoming the development.
Shen Jianguang,  an economist with Hong Kong-based Mizuho Securities,  questioned the report, saying that the firm was using short-term cyclical developments to rate much long-term sovereign issue.
'We need to look at sovereign rating from a perspective of a much longer time horizon. The US government has never defaulted, while Chinese governments - from Qing dynasty, to Nationalist government, to communist governments - have all experienced some sort of sovereign default,' Shen said.
'Thus, I am very doubtful of its capacity to do anything creditable on sovereign risk assessment and credit rating,' Shen said. 
The report comes amid increasingly loud complaints by central  government officials and some Chinese economists that Western rating agencies fail to give China full credit for its economic strength.  At last month's  G20 summit in Toronto, President Hu Jintao  called for the reform of the current international credit rating system.  
The Chinese  firm said it hoped to 'break the monopoly' of Moody's, Standard & Poor's and Fitch, whose reputations have suffered after they assigned top ratings to mortgage-related investments that later turned out to be almost worthless.
The financial crisis showed that the international rating system 'does not correctly reveal the debtors' repayment ability and  gives wrong information,' said Guan Jianzhong,  the firm's chairman. 'This marks a new beginning for reforming the irrational international rating system.'  
Acknowledging that many in China blame the major credit rating agencies - all Western - for contributing to the global financial crisis, Condon said that 'developing alternatives is harder to do'. 
'Time will tell whether Dagong can grow in reputation and acceptability to rival the western Big Three,' Condon said. In a commentary, Xinhua said reform of the international credit rating system had become imperative and the global financial crisis had exposed shortcomings and flaws in the current sovereign rating system.
Xinhua said the three leading Western rating companies dominated the  rating market, but failed to provide accurate evaluations, adding that many  top-rated bond products proved to be rated too highly. 
Founded in 1994, privately owned Dagong leads the Chinese rating market in corporate bonds, financial bonds and structured-financing debt, with more than 500 employees.



China plays its own ratings game