Chinese Agency lowered the US sovereign credit rating

25.01.2018

Chinese credit agency Dagong has lowered the United States’ sovereign credit rating. Slapping it down from A- to BBB+, placing the US on a negative outlook. This rating is now on par with those of Peru, Colombia and Turkmenistan.

According to the Beijing-based agency, "political deficiencies” of the US and its reliance on debt-driven economics are hindering further economic development. “The government did not discover from the financial crises that it is the debt-driven model of economic development that has hindered the country from making ends meet,” the agency said.

Dagong added that “the perennial negative impact of the superstructure on the economic base has continued to deteriorate. This affects the debt repayment sources of the federal government. This trend will be further exacerbated by the government's massive tax cuts."

It made specific reference to President Donald Trump’s tax package. It is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.

“Deficiencies in the current US political ecology make it difficult to efficiently administrate the federal government, so national economic development derails from the right track,” the rating agency added.

In December, Washington reported a $23 billion deficit. This was 15.2 percent lower than the $27.3 billion imbalance from the year-earlier month. The deficit totals $225 billion, up from a deficit of $209.8 billion for the same period a year ago. The Chinese credit rating agency said Washington’s policy will force the feds to raise the debt ceiling with more frequency.

The Treasury Department said in November that “extraordinary measures” would allow the government to continue to run through January. However, the Treasury also warned the government could have no choice but to raise the debt ceiling again sometime this month.

"Extraordinary measures will allow the government to continue to meet its obligations through January 2018. It is currently too early to provide a more precise forecast as to how long the extraordinary measures will last," said the Treasury.

International ratings agencies Fitch and Moody’s both kept their top AAA ratings on the US government debt. Standard & Poor’s has left it on a slightly lower grade of AA+ since 2011.

 

Zarina Tsomayeva is a sociologist and business journalist working in English, Arabic, Spanish and Russian. She is from Ossetia and is based in Moscow Russia. 

 

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