Tuesday, 13 July 2010

A Chinese endorsement

Australia is one of only seven countries awarded the top AAA  credit rating by a Chinese entrant into the international credit rating business. Dagong Global Credit Rating Co Ltd released its 2010 sovereign credit risk ratings in Beijing this week and they show a quite different picture to those of the United States based agencies such as Moody’s, S&P and Fitch.
Of the 50 countries rated , there was an obvious difference in those by Dagong and the three majors for 27 countries. “Those countries which have received higher ratings are mainly the new emerging countries which have political stability and good economic performance,” the Chinese analysts said.
13-07-2010 dagongcreditrating
Those countries which have received lower ratings are many developed countries which have shown economic growth and are heavily burdened with increasing debt. These differences are caused by different rating concept and method which have been used by Dagong. More importantly, during the rating process, Dagong has insisted to extend a fair rating which should not be affected by the ideology in the country.”
The core elements of the Dagong ratings standard are said to be the “national governance capacity, economic strength, financial strength, fiscal strength and foreign exchange strength”  with the core concept being that the wealth creating capacity is the fundamental for a country to support its national borrowing capability and the source of debt payment.
Under these criteria, Australia, along with Norway, Denmark, Luxembourg, Switzerland, Singapore and New Zealand were assigned AAA ratings; China, Canada, the Netherlands, Germany were assigned AA +, the United States and  Saudi Arabia AA; France , the United Kingdom, Korea and Japan got AA-. The countries that were assigned local currency sovereign credit rating of A- level include Belgium, Chile, Spain, South Africa, Malaysia, Estonia, Russia, Poland, Israel, Italy, Portugal and Brazil.
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