16 July 2010

China is not only making cheap goods: it produces sovereign ratings

Dagong Global Credit Rating Co. has just released its first comprehensive sovereign rating table which presents some notable difference from the US based S&P's, Moody's and Fitch. The table below is borrowed from FT Alphaville:
Interesting enough, during the June G20 meeting held in Toronto, Hu Jintao, the Chinese Prime Minister, called for uniform methodologies and standards for sovereign credit ratings so that "rating results can accurately reflect the state of a country's economy and credit worthiness." One may wonder whether this rating list is not a subtle way to send a message to the West, and the USA in particular, which Asians are experts in.
There are not much details about the methodology used, but from what I read on Dragon's web site, more emphasis is put on solvency and less on a stable political situation (read democracy). China is cleverly using the failure of US rating agencies with the subprime dabacle to get in, and Europe, as usual is absent despite comments made and decisions taken (?) about creating a European based rating agency for the past few months (such an attempt, from memory during in the late 90s, did not succeed).
I must admit, that reading the ranking of countries makes sense to me, the US not being AAA, with one caveat: the US is too big to fail...
I provide below an extract of the 50 countries rated by Dragon. France and Britain are justifiably stripped from their AAA western engineered rating.