Rocky Vega

What you already know about China-based Dagong Credit Rating is that it’s caused quite the kerfuffle over sovereign debt ratings by ranking China higher than the US and other developed countries, like the UK and Japan, based on a formula assigning more weight to the fiscal health and GDP growth of countries.

What you may not know is that last year Dagong officially applied to the SEC to become a Nationally Recognized Statistical Rating Organization (NRSRO), of which now there are only 10 (all of which are either North America- or Japan-based), and now claims to be getting the run around.

According to Fortune:

“This is stirring stuff. But as is often the case with news out of China, the latest Dagong statement itself is a bit of a riddle. Has the firm actually been rejected, as it contends, or is Dagong simply posturing?

“An outright U.S. rejection seems unlikely. The firm applied in December 2009 with the Securities and Exchange Commission for status as a Nationally Recognized Statistical Rating Organization, or NRSRO – the designation under which Moody’s, S&P, Fitch and several other agencies have registered with the SEC.

“Dagong sought the NRSRO label even though it has no U.S. offices, rates no U.S. companies and has no U.S. customers. As a result, the SEC said it would have to hold hearings to determine ‘whether Dagong has a sufficient connection with U.S. interstate commerce to register as an NRSRO.’

“In April, the SEC said it aimed to settle the question by July, but the next month the commission extended that deadline to Sept. 23. The commission hasn’t issued a ruling, an SEC spokesman said Wednesday, and isn’t likely to do so till September — which seems to rule out the ‘rejection’ the China Daily article speaks of.”

Part of what’s interesting about this latest twist is that Dagong, which makes the point of having “global” in its name, wants to be “nationally recognized” in the US despite, as noted above, having little connection to the nation. Of course, the NRSRO agencies – well, at least Moody’s, Standard & Poor’s, and Fitch Ratings — have influence far beyond US borders… and at least Canada and Japan have both jumped on the NRSRO bandwagon… but it’s hard to see what advantages they’ve gained as foreign organizations designated NRSROs.

You can read more details in Fortune’s coverage of how China’s Dagong says the US rejects it.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

  • et2cetera

    The present rating agencies (S&P, Moody’s et al) seems to suffer from a conflict of interest – they get paid by the same corporations to rate them. And dare they rate the US as it is? Not unless they want to commit financial suicide.

    So, if Dagong were to rate the US corporations on its own (paid for by users), it would be more objective than what we have now. The sooner the SEC grant NRSRO status the better. More competition (after all, the US likes to claim that it is an open market) and a different perspective will make the ratings less biased, thereby benefiting the general public.

Recent Articles

Extra!
The Greatest Challenge Facing America’s Economic Dominance

Alasdair Macleod

Next month, for major countries will become full members of the Shanghai Cooperation Organisation (SCO). That will increase the population of SCO member states to 3.05 billion. But why should you care? As Alasdair Macleod explains, this move could have a very important impact on the US dollar. Read on...


On Sale: A Precious Metals Play with a Reliable Dividend

Dan Amoss

Precious metals get a bad rap from most investors. But in the midst of so much central bank money creation, they still provide an excellent hedge against inflation. Dan Amoss relays one great investment idea in this sector with plenty of upside potential as precious metals look poised for a significant comeback. Read on...


An Early Stage Opportunity in the Next Phase of 3D Printing

Wayne Mulligan

Over the last two years, few innovations have had as big of an impact as 3D printing. But as important as this technology has become, one new tech story is about to leapfrog over it. And as Wayne Mulligan explains, early investors in this new innovative technology could make a fortune by getting in early...


Laissez Faire
How to Get Free Airfare to Almost Anywhere in the World

Chris Campbell

Traveling the world can be expensive. Between airfare, dining costs and hotel accommodations, travel expenses can add up quickly. And the last thing you want on your vacation is to be stretched too thin. Chris Campbell explains how you can eliminate one of the biggest travel expenses entirely, with one simple trick. Read on...


1990s Flashback: A Blueprint for the Current S&P Rally

Greg Guenthner

The S&P finally closed above 2,000 yesterday - a new all-time high. And that has some investors comparing it to the heady days of the late 1990s, when the S&P soared through 1,000 and didn't bother to look back. But as Greg Guenthner explains, that run up wasn't without its pitfalls, and this one won't be either. Read on...


5 Min. Forecast
“Neofascism” in 2014 America

Dave Gonigam

The fall of the US dollar-based monetary system will happen much like Hemingway's description of how one goes bankrupt: "gradually, then suddenly." And, as Dave Gonigam explains, when the inevitable finally happens, there's one group of investors who will be happy they listened to folks like Jim Rickards. Read on...