"US rating must be far lower than set by S&P"
Despite the US rating having already been downgraded to AA+ by S&P, Martin W. Hennecke, associate director of Tyche Group Ltd, believes it is not enough and states the Asian estimations should be treated more carefully.
“Chinese rating agency Dagon Global is far more reliable than the Western ones, and they’ve already downgraded the US to A with negative outlook,” Hennecke said.
However the financial ratings are not the only indicator of the deep crisis in the global economy. Many people may not believe in the reliability of the S&P, Moody's and other agencies. But it is not only the rating agencies that are causing “this mess in Europe and the US,” he added.
“Look at the total fiscal gap, the horrible short for the US finances. This number is US$211 trillion. That’s not too far from Greece. That’s why, I think, the AA+ rating for US is ridiculous, it should be far lower,” Hennecke said.
In light of the possible downgrades of ratings of the leading developed economies, the Chinese market’s growth is seen as very optimistic. According to an IMF projection, the Chinese economy may overtake the US by 2016 to become the world’s largest and strongest.
Martin W. Hennecke finds such a projection more than rational, stating China has in many regards already overtaken the rivaling economy of the US.
“You may look at the physical economy, production, on the purchasing power adjusted basis, because the renmimbi [RMB, the official currency of China] is undervalued and you need to reflect them looking at the economic sizes,” he said.
However he admits that China highly depends on the US dollar which is the main reserve currency for this Asian country. China keeps around 70 per cent of its assets invested in dollars, being the biggest foreign buyer of American currency.