Tuesday, July 13, 2010

Chinese downgrade West's credit

China's leading credit rating agency has stripped America, Britain, Germany and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favour of the West.

So writes Ambrose Evans-Pritchard, who tells us that Dagong Global Credit Rating Co used its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to "wealth creating capacity" and foreign reserves than Fitch, Standard & Poor's, or Moody's.

The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia. Meanwhile, China rises to AA+ with Germany, the Netherlands and Canada, reflecting its €2.4 trillion (£2 trillion) reserves and a blistering growth rate of 8pc to 10pc a year.

It would be unwise to read too much into this, however. Dominique Strauss-Kahn, chief of the IMF, declares that the rising East is a transforming global force. "Asia's time has come," he says. But politically, China is a basket case and big Asian countries like India and Indonesia are so mired in corruption and bad governance that they are not going to realise their potential any time soon.

We may be down and out – largely a self-inflicted wound – but there is no real sign of Asia being a replacement.