China View reports that China unveils first sovereign credit rating standards.
China unveils first sovereign credit rating standards
www.chinaview.cn 2009-05-23 20:53:19
Editor: Wang Guanqun
BEIJING, May 23 (Xinhua) -- China unveiled Saturday credit rating standards for the sovereignty entity of a central government, the first sovereign credit rating standards in China, aiming broader participation in global credit rating.
The standards were announced by Dagong Global Credit Rating Co., Ltd, one of the first domestic rating agencies in China.
The sovereign credit rating standards would be able to evaluate the willingness and ability of a central government to repay its commercial financial debts as stipulated in contracts, said the company.
The rating results could reflect the relative possibility of a central government to default as a debtor, and the rating is based on the country's overall credit value, according to Dagong.
My reaction: As China's financial system becomes more sophisticated, China is quickly cutting its reliance on the services provided by Wall Street and the western banking system. The new Chinese credit rating standards for the sovereignty entities is part of this process.
By developing its own credit rating agencies, China is aiming at broader participation in global credit rating. Since the reputation of US credit rating agencies has been badly damaged by the financial crisis, they are not in a position to defend themselves against this challenge to their authority. Chinese rating agencies will soon play a much bigger role in the global financial system, especially in China.
Key question: How will Dagong Global Credit Rating rate the US?
Since Chinese rating agencies has developed sovereign credit rating standards capable of evaluating "the willingness and ability of a central government to repay its commercial financial debts as stipulated in contracts", it stands to reasons they will use these new standards to judge the US's credit worthiness. Furthermore, unlike America's rating agencies (Moodie, S&P;, etc...) which currently dominate the field, Chinese rating agencies are outside the US sphere of influence. It will be very interesting to see what rating they come up with.