Chinese ratings agency cuts US debt over political ‘deficiencies’

The move comes after China’s own credit rating was cut by two US agencies — Standard & Poor (S&P) and Moody’s — last year over concerns about the Asian country’s growing debt.

The Dagong Global Credit Rating Company cited the massive tax cuts backed by President Donald Trump as a concern but it also zeroed in on the US political atmosphere in a report on Tuesday.

The firm downgraded both the local and foreign currency sovereign credit ratings of the United States from A- to BBB+ and gave the world’s largest economy a “negative outlook”.

“Deficiencies in the current US political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” the agency said.

“Under the political ecology which is built by the factional rivalries, factional interests are prioritized, and it is hard for the government to focus on the management of the national economy and social development,” it said.

Dagong is recognised as China’s foremost credit rating agency and claims to be the only one with joint approval from both the People’s Bank of China and the State Economic and Trade Commission.

“The perennial negative impact of the superstructure on the economic base has continued to deteriorate the debt repayment sources of the federal government, and this trend will be further exacerbated by the government’s massive tax cuts,” Dagong said.

“The increasing reliance on the debt-drive mode of economic development will continue to erode the solvency of the federal government.”

It added: “Trump’s tax cuts will directly reduce the federal government’s revenue and adversely affect the government’s fundamental source of debt repayment.”