Chinese Rating Agency Downgrades US Debt Despite Deal

Posted August 2nd, 2011 at 11:10 pm (UTC-5)
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A little-known Chinese debt rating agency has downgraded the U.S. credit rating.

The agency, Dagong Global Credit Rating, lowered its rating for U.S. debt from A-plus to A, saying the deal reached in Washington this week will not solve the underlying U.S. debt problems or improve the country's ability to pay.

The action comes as two major American rating agencies announced they will not immediately alter the country's top rating, and it was not expected to have much effect on interest rates. However the agency's analysis closely followed that of a commentary Tuesday in the People's Daily, which reflects the views China's ruling Communist Party.

China is the United States' largest foreign creditor.

Also Wednesday, the governor of China's central bank says he welcomes passage of the U.S. debt ceiling bill, and will closely observe its implementation.

Zhou Xiaochuan said China hopes the Obama administration and Congress will carry out responsible policy measures to deal with the U.S. debt issue, to help protect worldwide financial interests and investors in U.S. treasuries.

The commentary in the People's Daily said that while the threat of default has been avoided, America's debt problems are unresolved and likely to grow more serious. It said the American debt burden continues to cast a shadow over the U.S. economic recovery, and increases the risks faced by the rest of the world economy.