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China graded AAA by domestic agency

By Zhao Qian (Global Times)

07:22, June 01, 2012

A Chinese ratings agency yesterday graded the country's sovereign credit outlook at its highest level of AAA, higher than the levels declared by the three most prominent foreign ratings companies.

China's economy still retains stable growth momentum, even though the government set a GDP growth target of 7.5 percent this year, down from the 8 percent goal in 2011, China LianHe Credit Rating Co said in a report yesterday.

The lowered target is a result of government plans to shift the focus from economic growth to development quality, the company said.

The ratings agency graded both the country's long-term foreign and local currency credit ratings at the AAA level, owing to fast growth of fiscal income, the low financial deficit rate and the large amount of foreign exchange reserves.

A sovereign credit rating indicates the risk level in a country's investing environment.

This is the first time that China LianHe Credit Rating has released a sovereign rating outlook for China. It also released ratings for the US, Germany, Japan and Australia. Japan received a rating of AA+, but the other countries got the highest AAA level.

The company hopes to "break the dominance of the three foreign ratings companies," General Manager Zhang Zhijun told the Global Times.

"It is unfair for the foreign ratings companies to monopolize the global sovereign ratings market," Zhang said.

Zhang noted more institutions should have a say in the ratings sector so as to offer multiple suggestions for investors.

However, Wan Huawei, the company's rating director, told the Global Times yesterday that "it takes time for investors to check out whose ratings are more authentic."

There are six major ratings agencies in China, but only two of them have issued nations' sovereign ratings so far.

Dagong Global Credit Rating was the first domestic ratings agency to publish sovereign ratings in 2010. In most cases, its findings were different from the top three agencies.

The foreign agencies tend to award higher ratings to countries with more market-oriented economies, while Dagong pays more attention to government macro-controls, according to a report by Chen Yong, a researcher at Pengyuan Credit Rating Co, another domestic ratings agency.

In December last year, Standard & Poor's affirmed its ratings of China's long-term and short-term sovereign credit at AA- and A-1+ respectively, below the firm's highest rating of AAA.

Moody's Investors Service made no change to its Aa3 foreign and local currency bond ratings for China in its report released on April 26, also below its highest rating of Aaa.

In a report issued on April 11, Fitch Ratings affirmed its ranking of China's foreign currency Issuer Default Rating (IDR) at A+ and its rating for local currency IDR at AA-.

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