Imperialist Western oppressors, consider yourselves well and truly told: China’s first ‘official’ credit ratings agency has stripped half of the world’s largest economies including the USA, Germany and the UK of their AAA credit ratings, and there’s nothing they can do about it. Apparently, the reason other, more internationally recognised, credit ratings agencies haven’t done the same thing is because of an ‘ideological bias’ in favour of the West. It might sound farcical, but with the UK’s rating under review by US agency Standard and Poor’s, this might not be as much of a joke as we think…
Dagong Global Credit Rating Co, China’s first official credit rating agency, says this is the first ‘non-western’ assessment – and apparently, the world economy looks vastly different from the other side of the globe. While Luxembourg, the Netherlands and Denmark managed to cling on to an AAA rating, the USA has fallen to AA, and France and the UK have fallen to AA-. Belgium, Spain and Italy have dropped to A- and even Germany has fallen, to AA+ - but it’s in good company, with the Netherlands, Canada and, unexpectedly, China. Something of a contrast to assessments by Moody’s and S&P, which rate China at A1 and A+ respectively.
Usually, this sort of challenge wouldn’t be great news for the three main credit ratings agencies, who have seen their authority called into question over the course of the credit crisis. While its competitors were weak, Dagong apparently saw the chance to jump in and ‘remake the global credit rating landscape’. It would have been a nice idea, had it not then expressed the desire to ‘establish China as a superpower in the international financial service system… An important reflect for the great rejuvenation of the Chinese nation is China’s status and its influence in the world’. Er – ideological bias, anyone?
More seriously, though, S&P has announced that while it’s leaving the UK’s sovereign debt rating as AAA for now, it is under review: there are ‘large and politically challenging spending decisions’ that could lead to debt levels which are ‘incompatible’ with the rating. The agency says it’s holding out until the Government’s autumn spending review to make a final decision. If it’s ‘agreed in a manner consistent with the 2010 Budget predictions’ – ie some very stringent measures are taken – the agency will be satisfied that the debt burden will peak in the next three years. Portugal, too, has been slashed from A1 to AA2 – not particularly good news for the struggling economy.
So while the Chinese stripping us of our credit rating might not pose an immediate challenge to the UK, if S&P follows suit, it could have more serious implications. In this case, to paraphrase Karl Marx: let the ruling classes tremble – or at least look very nervous.
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