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Dagong Says Will Cut US Rating As Early As Monday

Tyler Durden's picture




 

And while our rating agencies still get their marching orders from Bill Gross and from Obama, in that order, China is not waiting. In a just posted Reuters interview, Dagong said on Thursday it plans a further downgrade as early as next week, even as politicians race against the clock to avert a ruinous debt default. Guan Jianzhong, Chairman of the Beijing-based Dagong Global Credit Rating Co, said he still believed U.S. lawmakers will clinch a last-minute deal on the U.S. debt ceiling, but the damage has been done. "We will react soon, probably next Monday or Tuesday. We need to look at whether they reach a compromise and the scope of the compromise, then we decide how deep the rating cut will be," Guan told Reuters in an interview in his spacious office. Naturally, this move will be aped by our own mockeries of a "rating" agency, leading to a very curious paradox: after all is it not the sock puppet at the top of it all - our very own distinguished tax evading eminence Tim Geithner himself who had the following exchange with Fox' Peter Barnes as recently as April: "Is there a risk that the United States could lose its AAA credit rating? Yes or no?” Geithner’s response: “No risk of that.”  “No risk?” Barnes asked. “No risk,” Geithner said." So... when the US is downgraded in a week or so.... does that mean it is time to fire Geithner?

As for Dagong, who as usual is ahead of the curve:

"We will definitely cut the rating, regardless whether there will be a compromise. It has already dealt a blow to investors' confidence," Guan said. He said it could slash the rating to D if Washington defaults.

 

Guan's warning was starker than in an interview with Reuters on July 14, when he threatened to cut U.S. ratings in the coming three to six months if there was no major event to make real improvement in the U.S. fiscal situation.

 

Guan defended Dagong's higher AA plus rating for China, saying it's natural for Washington's biggest creditor to have a higher rating.

 

Economists estimate that China has parked about 70 percent of its $3.2 trillion foreign exchange reserves in U.S. assets.

Naturally, while bashing the US, Dagong is happy to close its eyes to the mess in its own back yard:

In contrast to his bearish view on the United States, Guan said China's economy would remain on a sound footing, which will contain default risks from piles of local government debt.

 

Dagong has no plan for now to downgrade or monitor ratings of debt issued by local government financing vehicles (LGFVs) or other debt rated by the agency, Guan said.

 

"I'm not worried about local government debt," he said, pointing to hefty government revenues and state assets.

 

"The Chinese government is a strong government, it has ability to mobilise resources," he said.

 

Further more, Chinese banks would not exacerbate default risks by cutting loans to LGFVs.

We expect Moody's to retaliate promptly to Dagong's downgrade of the US by downgrading China in kind, and so the great race to the mutuall assured D-rating of the two great superpowers will enter its second of three laps... A race which will be won by China once it realizes that its $1.2 trillion in US paper will never be repaid.

 

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Thu, 07/28/2011 - 09:21 | 1500711 qussl3
qussl3's picture

Dagong is non political.

Right.

It would be hilarious if this sparked a cycle of truth telling by the agencies, and the China yahoo lending system gets brought to light.

 

Thu, 07/28/2011 - 09:26 | 1500730 trav7777
trav7777's picture

I'm surprised they don't rate China AAAA

the entire ratings system is a complete sham, top to bottom

Thu, 07/28/2011 - 09:47 | 1500834 r101958
r101958's picture

So, let's find which agencies are further from the truth. And no matter how much I hate to say it....it isn't the Chinese.

Thu, 07/28/2011 - 10:04 | 1500898 IQ 145
IQ 145's picture

I went short the long bond contract on the CME, "US Bond"; this morning from 126-08; with profits from other trades detailed elsewhere. this post seems to touch on the subject of Bonds; (credit-worthiness), so I'll post the trade here. Sept. 2011 contract.

Thu, 07/28/2011 - 09:19 | 1500713 NumNutt
NumNutt's picture

Fire Geithner?!?!?! Should never had gotten the damn job when it was discovered he couldn't figure out how to pay taxes. We can thank Obama for giving him the job anyway.

Thu, 07/28/2011 - 14:00 | 1501686 Monday1929
Monday1929's picture

Remember, geithner stated that the NY Fed was "not a regulator". The NY Fed IS explicitly a regulator. If he was not fired for that, and if he has not yet been tried as a traitor, .............

Thu, 07/28/2011 - 09:19 | 1500715 LRC Fan
LRC Fan's picture

So let's get this straight.  We are rated triple A, yet we are also just mere days away from defaulting?  Lolllllllllllllllllllllllllllll...lol..ollol

Thu, 07/28/2011 - 13:20 | 1501565 Mad Cow
Mad Cow's picture

Top of the dung heap! Yeah!

Thu, 07/28/2011 - 09:24 | 1500722 nonclaim
nonclaim's picture

To fire as in squad, for treason?

Thu, 07/28/2011 - 09:26 | 1500729 MFL8240
MFL8240's picture

The US has a triple A rating and is printing dollars to pay the interest and keep the charde going.  This is actually quite funny is not so serious.

Thu, 07/28/2011 - 09:26 | 1500732 SheepDog-One
SheepDog-One's picture

Dagong is going to cut the US debt rating deeper than 'defaulted'?

 

Dagong Rating Agency: "The US Has Already Defaulted" | zero hedge

 

Thu, 07/28/2011 - 09:26 | 1500733 MFL8240
MFL8240's picture

The US has a triple A rating and is printing dollars to pay the interest and keep the charde going.  This is actually quite funny is not so serious.

Thu, 07/28/2011 - 09:27 | 1500737 NotApplicable
NotApplicable's picture

He's fearless! Risk is for pussies.

Thu, 07/28/2011 - 09:37 | 1500792 Cash_is_Trash
Cash_is_Trash's picture

Taylor Swift is Fearless, Timmah is just an arrogant nut.

Who's his barber? In order to stay far far away.

Thu, 07/28/2011 - 09:29 | 1500744 the not so migh...
the not so mighty maximiza's picture

Dagong is all talk and no action.  Just do it , whata are you chicken?????

Thu, 07/28/2011 - 09:34 | 1500775 NumNutt
NumNutt's picture

They do it and it will be like the shot fired at the beginning of a race, except this will be a race to the bottom. The front runners will be the USA, Greece, Italy, Spain, and yes China.

Thu, 07/28/2011 - 09:43 | 1500819 Cash_is_Trash
Cash_is_Trash's picture

It is a race to the bottom and the Germans are footing the bill for the Euro.

Read Rickards piece @ KWN:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/7/28_Ji...

Thu, 07/28/2011 - 13:55 | 1501675 NumNutt
NumNutt's picture

Wienerschnitzel for everyone!!!!! ........Now show us your papers!

Thu, 07/28/2011 - 09:29 | 1500745 Long-John-Silver
Long-John-Silver's picture

The USA defaulted on 15-AUG-1971 when France called Nixon's bluff on having the Gold to back all the US Dollars they held. Nixon had no choice simply because France had more US Dollars than Ft Knox had in physical Gold. Our credit rating should have been downgraded with the closing on the Gold Window.

Thu, 07/28/2011 - 09:30 | 1500747 Grand Supercycle
Grand Supercycle's picture

S&P500 monthly chart originally posted January 2011 - shows a series of broadening patterns, aka megaphone wedges.

The three broadening formations reveal an unstable market where buyers and sellers battle for control.

The first two megaphones make clear the eventual victors.

Prepare for the next Black Swan which will be ‘unexpected and could never have been predicted’.

http://stockmarket618.wordpress.com

Thu, 07/28/2011 - 09:31 | 1500755 Van Halen
Van Halen's picture

You guys at ZH just don't understand what Geithner is trying to say. You see, there's no risk of a credit downgrade... until there is a risk of a credit downgrade. In the same way, there's no recession until there is a recession. Likewise, we are not in a depression until we are in one. We're rounding the bend to an economic turnaround until we don't and gold is not better than paper until it is. Any questions, just ask Ben Bernanke. Now THERE is an intelligent, well-educated, we-can-be-safe-knowing-we're-in-his-hands economist!

See what a good education at an Ivy League school will do for you?

Thu, 07/28/2011 - 09:42 | 1500812 SheepDog-One
SheepDog-One's picture

Right, the second downgrades happen, then theres risk! Just have to think like a Ive League sneaky little shit.

Thu, 07/28/2011 - 09:47 | 1500839 Cash_is_Trash
Cash_is_Trash's picture

Revolutionary thinking Van Halen.

So Tim isn't a piece of shit, just because he isn't a steamy pile of anal yoghurt?

I want an education (and arrogance) like Tim's! Peace

Thu, 07/28/2011 - 13:25 | 1501584 Diogenes
Diogenes's picture

Maybe he means there is no risk about it, because it is a dead cert.

Thu, 07/28/2011 - 09:31 | 1500756 Van Halen
Van Halen's picture

You guys at ZH just don't understand what Geithner is trying to say. You see, there's no risk of a credit downgrade... until there is a risk of a credit downgrade. In the same way, there's no recession until there is a recession. Likewise, we are not in a depression until we are in one. We're rounding the bend to an economic turnaround until we don't and gold is not better than paper until it is. Any questions, just ask Ben Bernanke. Now THERE is an intelligent, well-educated, we-can-be-safe-knowing-we're-in-his-hands economist!

See what a good education at an Ivy League school will do for you?

Thu, 07/28/2011 - 09:34 | 1500777 youngman
youngman's picture

I wonder how low the rating can go before China can no longer buy US debt....it they still are.....I assume they have regulations that say they can´t by junk...don´t they????  one wonders...pass me another beer...

Thu, 07/28/2011 - 09:44 | 1500826 SheepDog-One
SheepDog-One's picture

Right, I'll buy your junk, you buy my junk, together we'll Sanford and Son this world into another bubble!

Thu, 07/28/2011 - 09:42 | 1500814 Debtless
Debtless's picture

Guan defended Dagong's higher AA plus rating for China, saying it's natural for Washington's biggest creditor to have a higher rating.

Logic. It just doesn't seem to apply in our view. Next question...

Thu, 07/28/2011 - 09:59 | 1500883 youngman
youngman's picture

Actually they sit on trillions of cash...profits......and their economy is growing at 8%....and they have a growing middle class......I think they are sitting above the USA...

Thu, 07/28/2011 - 10:42 | 1501081 zhanglini
zhanglini's picture

China does not own these foreign reserves dollars, it is mostly multinationals' investment (FDI) in China. They brought dollars to the Chinese banks to exchange for RMB, so that they can use these RMB to buy equipments, plants, hire people etc. When they decide to leave China, they sell the plants/equipments for RMB, then go back to the Chinese bank to exchange for $s --- so China is just holding the $s for them, the the time being.

Think about it: average FDI per year is $75B, so 75x 20 (years) = $1.5 T and these multinationals also have probably $1T worth of trade supluses.

And the foreign reserves dollars is definitely not profits for the Chinese either.

Thu, 07/28/2011 - 09:44 | 1500823 riskonriskoff85
riskonriskoff85's picture

every sell side trading desk out there is now using Zerohedge as their primary source of intelligence, amazing!

Thu, 07/28/2011 - 09:53 | 1500861 buzzsaw99
buzzsaw99's picture

They will downgrade then buy more Ts. LMAO!!

Thu, 07/28/2011 - 10:05 | 1500903 Byte Me
Byte Me's picture
"We will definitely cut the rating, regardless whether there will be a compromise.

Beware -- the collective has spoken, resistance is futile. What a load of bollocks. Fuck off and rate your own HST railsystem Dagong.

Thu, 07/28/2011 - 10:25 | 1500992 BandGap
BandGap's picture

OK, does this not cut their own throats or is the debt they hold unaffected? Also, this is a fairly strong indication that any future debt that China buys will come with far higher yields.  I mean, are they tipping the scales to their terms in a number of ways? And last, I would love to give a shit about China but we have to get our house in order first.  Chuckles galore if the US was on the upside at this point.

This bullshit is just crazy.  In all honesty I don't read sometimes just to maintain a semblance of past happiness.  When does this steaming pile explodes so we can get to the clean-up?

 

Thu, 07/28/2011 - 10:25 | 1500994 BandGap
BandGap's picture

OK, does this not cut their own throats or is the debt they hold unaffected? Also, this is a fairly strong indication that any future debt that China buys will come with far higher yields.  I mean, are they tipping the scales to their terms in a number of ways? And last, I would love to give a shit about China but we have to get our house in order first.  Chuckles galore if the US was on the upside at this point.

This bullshit is just crazy.  In all honesty I don't read sometimes just to maintain a semblance of past happiness.  When does this steaming pile explodes so we can get to the clean-up?

 

Thu, 07/28/2011 - 10:49 | 1501111 caerus
caerus's picture

bang dagong bitchez

Thu, 07/28/2011 - 11:51 | 1501270 Bam_Man
Bam_Man's picture

Bang Dagong

It would be so cool if that was actually Mr. Dagong's given name.

Get it on!

Thu, 07/28/2011 - 11:49 | 1501273 Bam_Man
Bam_Man's picture

.

Thu, 07/28/2011 - 10:53 | 1501118 aerojet
aerojet's picture

Does anyone care what Chinese ratings agenices do or don't do?  China had better watch it, we all know their economic numbers are all phoney-baloney nonsense, too.

Thu, 07/28/2011 - 10:53 | 1501119 karzai_luver
karzai_luver's picture

This CHina bubble will end badly for the US.

 

There is no hope for a good outcome.

Home field advantage fantasy marks bitchezz.

 

Thu, 07/28/2011 - 11:54 | 1501289 Bam_Man
Bam_Man's picture

This China bubble will end badly for the entire world.

OK, maybe not Somalia, Zimbabwe and a few others.

Thu, 07/28/2011 - 23:26 | 1503181 Helix6
Helix6's picture

OK, here's a little thought exercise:  Chinese businesses sell gazillions in the US, garnering gazillions of $US.  Unfortunately, being in China, they need Yuan to run their businesses, not $US.  Meanwhile, the US businesses sell bupkus in China, earning a few meager Yuan.  Unfortunately, they need $US to run their businesses, not Yuan.  One thinks that Yuan would appreciate relative to $US under this scenario, given that there are few Yuan here, which Chinese businesses need, and gazilllions of $US there, which US businesses need.  But that doesn't happen!  The exchange rate is essentially "pegged".  The question is... how are all those $US, held by Chinese businesses, converted back into Yuan?  Where do all those Yuan, needed to soak up all the $US in China, come from?

(Hint: The Chinese government/central bank seems to end up holding a shitload of US treasuries, which are bought with $US.  Can you spot the missing link?)

Never let it be said that Chinese officials aren't every bit as hypocritical as US officials.  They just play the game better, that's all.

Fri, 07/29/2011 - 03:47 | 1503657 qing
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Fri, 07/29/2011 - 03:47 | 1503660 qing
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Wed, 09/14/2011 - 03:53 | 1667148 chinawholesaler
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