BEIJING Oct 17 A Chinese ratings agency cut its
credit rating for U.S. sovereign debt by one notch to A-minus
from A on Thursday, saying a deal struck by Congress to raise
the government's borrowing ceiling failed to solve the cause of
its debt problem.
Dagong Global Credit Rating said that the temporary fix of
the debt issue would not defuse the fundamental conundrum of the
U.S. fiscal deficit or improve repayment ability in the
long-term, but could trigger defaults at any time in the future.
"The deal means only an escape from a debt default for the
time being, but hasn't changed the fact that the growth of
government borrowing has largely outpaced overall economic
growth and fiscal revenues," China's biggest home-grown ratings
agency said in a statement.
The U.S. Congress on Wednesday approved an 11th-hour deal to
end a partial government shutdown and pull the world's biggest
economy back from the brink of a historic debt default that
could have threatened financial calamity.
Dagong said the increase in the debt ceiling, for the fifth
time since President Obama took office in 2009, provided further
proof of the U.S. government's inability to make improvements to
fiscal fundamentals that were needed to enhance its debt
It said it held a negative outlook for the United States,
noting that the Federal Reserve continued to inject dollars into
the market through quantitative easing policies, eroding the
value of the outstanding debt and hurting creditors' interests.
The downgrade put the United States several notches below
Dagong's top rating and on par with Brazil, Israel and Panama,
Dagong's ratings are barely watched outside of China, and
major international credit agencies classify most countries very
differently from the Chinese agency.
Dagong estimated that the U.S.'s foreign creditors could
have suffered an estimated loss of $628.5 billion between 2008
and 2012 due to a weakening of the U.S. dollar.
China, sitting on the largest stockpile of foreign exchange
reserves in the world, is the biggest holder of U.S. treasuries.
Dagong's views do not necessarily represent the Chinese
government's stance, however, its analysis often runs in tandem
with remarks from government officials.
China's Vice Finance Minister Zhu Guangyao had earlier urged
the U.S. government to take "concrete steps" to resolve the
fiscal cliff issue and meet its responsibility to uphold
stability of international financial markets.
A commentary on the official Xinhua news agency on Thursday
took the two main U.S. political parties to task for
"The saga in Washington is teaching America's creditors a
lesson: U.S. politicians are ready to fight each other at the
expense of debt-holders' interests and U.S. Treasury bonds may
no longer be safe investment," the commentary said.
The commentary does not reflect official policy but is an
insight into views held at the top levels.
Fitch Ratings said on Tuesday it had placed a negative
outlook over its AAA rating for the United States due to the
political brinkmanship. Moody's Investors Service rates the
United States at Aaa, while Standard & Poor's rates it at
(Reporting by Aileen Wang and Jonathan Standing; Editing by