During what is a traditionally slow news period within the United States because of preoccupation with the holiday season, China lobbed a few thinly veiled barbs and hinted at challenges they would mount both in use of currency and U.S.-based credit ratings agencies.
Chinese banking official Zhou Xiaochuan announced that China, unsatisfied with the quality and accuracy of ratings coming out of the dominant U.S.-based credit ratings agencies (Moody’s Investment Services, Standard & Poor’s, Fitch Ratings) was seriously considering launching its own ratings agency. Additionally, he encouraged China’s largest financial institutions to consider launching their own competitors to the U.S.-based big-three or at least to add more researchers analysts to rely less on the existing services. The agencies have grown increasingly unpopular with what some characterize as trigger-happy downgrades of sovereign credit ratings of late, perceived conflicts of interest between its actual ratings and product offerings as well as its shaky performance in the lead-up to the global economic freefall.
Granted, there would be a lot of obstacles to overcome in either Chinese scenario as international trust of its government and banking system still lags far behind its status as a manufacturing hub. And that doesn’t even take into account the large cost to get anything competitive up and running to which potential clients, stuck in an ongoing tepid economic recovery, would be unlikely to pay a premium.
In a perceivably unrelated move, the Chinese and Japan announced new currency/trade partnership designed to boost both the renminbi and the yen in the area of trade, among others. Though largely symbolic and shrouded in a lack of finite details to date, the move appears to be a message that both are trying to gradually reduce reliance on the dollar as the dominant currency. While a statement not to be ignored, it’s not likely to push the Chinese currency ahead of the dollar on the world stage at any faster pace. As the Federal Reserve’s Matthew Higgins told NACM in an interview as well as attendees at FCIB’s New York International Roundtable in September, it could still take decades for the dollar to be replaced as the world’s go-to currency.
Brian Shappell, NACM staff writer