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China ratings house says US defaulting
Agence France-Presse in Beijing
1:47pm, Jun 10, 2011


A Chinese ratings house has accused the United States of defaulting on
its massive debt, state media said on Friday, a day after Beijing
urged Washington to put its fiscal house in order.
“In our opinion, the United States has already been defaulting,” Guan
Jianzhong, president of Dagong Global Credit Rating, the only Chinese
agency that gives sovereign ratings, was quoted by the Global Times
saying.


Washington had already defaulted on its loans by allowing the dollar
to weaken against other currencies – eroding the wealth of creditors
including China, Guan said.

The US government will run out of room to spend more on August 2
unless Congress bumps up the borrowing limit beyond US$14.29 trillion
– but Republicans are refusing to support such a move until a deficit
cutting deal is reached.

Ratings agency Fitch on Wednesday joined Moody’s and Standard & Poor’s
to warn the United States could lose its first-class credit rating if
it fails to raise its debt ceiling to avoid defaulting on loans.

A downgrade could sharply raise US borrowing costs, worsening the
country’s already dire fiscal position, and send shock waves through
the financial world, which has long considered US debt a benchmark
among safe-haven investments.

China is by far the top holder of US debt and has in the past raised
worries that the massive US stimulus effort launched to revive the
economy would lead to mushrooming debt that erodes the value of the
dollar and its Treasury holdings.

Beijing cut its holdings of US Treasury securities for the fifth month
in a row to US$1.145 trillion in March, down US$9.2 billion from
February and 2.6 per cent less than October’s peak of US$1.175
trillion, US data showed last month.

Foreign ministry spokesman Hong Lei on Thursday urged the United
States to adopt “effective measures to improve its fiscal situation”.

Dagong has made a name for itself by hitting out at its three Western
rivals, saying they caused the financial crisis by failing to properly
disclose risk.

The Chinese agency, which is trying to build an international profile,
has given the United States and several other nations lower marks than
they received from the the big three.