New credit rating agencies to balance 'Big Three', China says
“Traditionally credit rating is mostly done by Western credit rating agencies. They sometimes may not fully understand the dynamics of the economics of any particular company or the sovereign borrower,” he said, adding that the agency won’t pursue a goal of replacing traditional Western credit rating agencies like S&P and Moody’s.
“It will give the whole world another perspective of how risks are analyzed and how credit rating should be done,” he said.
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Gao believes Western rating agencies claim to be independent and professional, but in fact they turn out to be biased when it comes to issues of geopolitical importance.
“During the global financial crisis the Western rating agencies did not react as quickly as possible,” he said. “In terms of the rating of the sovereign debt of the US for example, or even for Japan, they’ve actually displayed much more flexibility in rating these countries compared with many other countries.”
The announcement of a rating could actually make a situation even worse rather than help stabilize it, he added.
Credit rating agencies are very much at the top of the international financial system and they’re not only active domestically in one particular country but in many cases they are active across national boundaries.
Gao said that China has its own credit rating agency Dagong which is actively operating in the country and abroad, increasingly estimating other countries’ and companies’ credit rating.
The analyst believes the global economy is changing and going through an important transformation as the emerging markets are growing and their portion in the global economy is increasing despite a significant turmoil in the international financial, economic and energy sectors.
Creating a joint credit rating agency of Russia and China is significant but it’s high time the world’s most important developing economies united and came up with their own credit rating agency, as in case of establishing the BRICS Development Bank, he said.
Gao supposes other emerging economies outside of the BRICS framework could join the establishment of alternative credit rating agencies.
“It’s important to have their voice heard, and in this particular context I think their own credit agency will indeed become more and more important in the coming few years and decades in light of the increasing importance of the emerging markets in the overall global economy,” he concluded.