China’s Dagong Global Credit Rating Co cut its credit rating for the US to A+ from AA because of a Federal Reserve plan to purchase bonds to spur growth and inflation, according to Xinhua News Agency.
The credit outlook for the US is negative amid deteriorating debt repayment capability and a “drastic” drop in the government’s intention to repay debt, Dagong said, as cited by the state-controlled news agency. The Fed’s quantitative easing policy will erode the value of the dollar and is against the interests of creditors, the company said.
“Serious defects in the US economy will lead to long- term recession and fundamentally lower national solvency,” Dagong said, as cited by Xinhua.
Dagong, seeking to become an alternative to Standard & Poor’s Corp, Moody’s Investors Service and Fitch Ratings, ranks China’s debt higher than that of the US and Japan, citing widening deficits in the developed world. Global ratings methodology is “irrational,” Dagong Chairman Guan Jianzhong said in July, and “cannot truly reflect repayment ability.”
The credit rating company’s remarks follow those of Chinese government officials, who have expressed concern that quantitative easing will hurt the country’s economy.
“Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing on November 5. “It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt.”