Chinese ratings agency ranks NZ highly

A Chinese firm trying to compete with the big three ratings agencies has ranked New Zealand seventh best credit risk in a list of 50 countries.

But the ranking is not expected to make this country's access to funding any cheaper.

Dagong International Credit Rating Co also declared the United States a worse credit risk than China in its first report on government debt.

The verdict was a break with Moody's, Standard & Poors and Fitch, which say US government debt is the world's safest. Dagong said it rated the US below China and 11 other countries such as Switzerland, Australia and New Zealand due to high debt and slow growth.

The report comes amid complaints by Beijing that Western rating agencies fail to give China full credit for its economic strength, boosting borrowing costs, the Associated Press reported.

At June's G-20 summit in Toronto, President Hu Jintao called for the creation of a more accurate system.

Dagong's chairman, Guan Jianzhong, said the current Western-led rating system was to blame for the global crisis and Europe's debt woes.

Dagong's report gave emerging economies such as Indonesia and Brazil better marks than those given by Western agencies, citing high growth. Along with the US, some other developed nations such as Britain and France also received lower ratings than those of other agencies.

New Zealand -- also highly rated by the big three agencies -- gets the top rating of AAA from Dagong for its local currency sovereign credit rating and AA+ for foreign currency.

Khoon Goh, senior markets economist at ANZ bank, told NZPA he doubted Dagong had the background or track record to be able to threaten the incumbents at this stage.

While the established ratings agencies were in a crisis, with their credibility having taken a hit, he expected they would continue to dominate for now.

"While we will have new entrants such as the one from China, and their ratings and analysis might be of interest to investors and markets from time to time, I don't think they will be in a position as yet to really move markets or change investors' minds based on their conclusions."

Based on deficit size and interest payments, and projections of how they would change, it was clear the US fiscal position was not in a great state, Mr Goh said.

But the US was more flexible and had better scope to work off the large deficits than did many other countries.

While the US fiscal position looked worse than this country's, New Zealand was small and dependent on what happened globally, and on that basis would always be rated lower compared to the larger economies, he said.

Certainly, based on the Dagong rating, NZ was not going to be able to get more favourable or cheaper access to funding, or anything of that sort.

- NZPA