Government

China's Latest Export: Bond Ratings

China is the world's banker, loaning money to indebted Western nations. So why shouldn't a Chinese rating agency lay odds on whether the borrower nations will make good on their debts?

Enter Dagong Global Credit Rating Co., LTD, of Beijing. Motto: "Value nothing but truth, credit and impartiality."

Dagong released credit ratings on the sovereign debt of 50 nations earlier this month. U.S. Treasury debt — widely regarded as among the safest investments in the world — got a AA rating, two notches below the highest rating.

China scored notably better.

Its foreign-denominated debt got the top rating, AAA; its debt denominated in local currency was rated one notch lower, at AA+.

This is a big break from the big U.S. ratings agencies, which all give U.S. debt their highest ratings.

"The western rating agencies are politicized and highly ideological and they do not adhere to objective standards," Dagong's chairman tells the FT. "China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged."

Dagong, which was founded in 1994 to rate Chinese corporate debt, is privately owned. But it seems to have strong support from China's Communist Party. The company recently held a press conference the headquarters of Xinhua News Agency, which is run by the Party, the AP notes.

And a recent Xinhua editorial called for more companies like Dagong:

To reform the West-dominated international financial order, more credit ratings agencies should be set up in non-Western countries to break Western monopoly over the global credit ratings business.

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