Source: The Financial Times                         Date: 27 July, 2010

The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated. “The western rating agencies are politicized and highly ideological and do not adhere to objective standards,” Mr. Guan Jianzhong, chairman of Dagong Global Credit Rating, said in an interview. “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.”

On the corporate side, Mr Guan argues Moody’s Investors Service, Standard & Poor’s and Fitch Ratings – the three companies that dominate the global credit rating industry – have become too close to the clients they are supposed to be objectively assessing. He specifically criticized the practice of “rating shopping” by companies who offer their business to the agency that provides the most favorable rating.

Privately-owned Dagong recently published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency. The results were very different from those published by Moody’s, Standard & Poor’s and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong’s belief that China is more politically and economically stable than all of these countries.

Mr. Guan said his company’s methodology has been developed over the last five years and reflects a more objective assessment of a government’s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth. “The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ,” Mr. Guan said. “Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”

A wildly enthusiastic editorial published by Xinhua, China’s official state newswire, lauded Dagong’s report as a significant step toward breaking the monopoly of western rating agencies of which it said China has long been a “victim”. “Compared with the US’ conquest of the world by means of force, Moody’s has controlled the world through its dominance in credit ratings,” the editorial said.