Chinese rating agency blames U.S. for debt-depreciating 'credit war'

Section:

By Zhou Xin and Kevin Yao
Reuters
Friday, January 28, 2011

http://www.reuters.com/article/2011/01/28/us-china-usa-rating-idUSTRE70R...

BEIJING -- The United States is effectively printing cheap dollars as it implements an ultra-loose policy to spur its flagging economy, setting the stage for "a world credit war," a Chinese rating agency said on Friday.

The Beijing-based Dagong Global Credit Rating, a relative newcomer in the sovereign debt rating realm, said in its 2011 Sovereign Credit Risk Outlook that quantitative easing by the U.S. Federal Reserve has "eroded the legitimacy of the global monetary system that takes the dollar as the key reserve currency."

The policy easing was also "bringing the U.S. dollar's credit-worthiness to a vulnerable position," it said.

Dagong, which has been rating Chinese corporate bonds since 1994, created a splash by rating the United States at double-A, below China's AA-plus, in July 2010.

It downgraded the U.S. sovereign credit rating last November, following the Fed's decision to pump more dollars into the U.S. economy.



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Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit:

http://prophecyresource.com/news_2011_jan18.php



Although Dagong's statement does not fully represent Beijing's view, it was in line with the government's unhappiness with the U.S. policy easing, which has been blamed by Chinese officials for fuelling global inflation risks.

As China's $2.85 trillion foreign exchange reserves are mainly denominated in U.S. dollars, Chinese Premier Wen Jiabao had publicly voiced concerns of the assets.

President Hu Jintao told a recent G20 summit at Seoul that China wanted "an international reserve currency system with stable value, rule-based issuance and manageable supply."

But Dagong said in the English-language report that the United States is trying to "haircut" its creditors by permitting a weakening currency.

"The behavior that the United States ignores international creditors' legitimate interests indicates a dramatic decline of the country's willingness to repay the debt," Dagong said.

In defining the "credit war," Dagong said "it aims at encroach on other countries' interests through continuous depreciating the actual value of the currency; and it arouses all the countries in the world to take various credit resources as a financial weapon to safeguard the national interests."

It added that the capital flows into emerging economics stemmed from cheap dollar is "a destructive factor to the healthy economic development in different countries."

Dagong added the sovereign debt crisis in the euro zone countries would intensify in 2011 and it may downgrade of sovereign credit ratings on Portugal and Spain.

"Countries, such as Portugal and Spain, will have to ask for bailouts in 2011," it said.

Earlier this month, China reaffirmed a commitment to buying Spanish bonds while newspapers in December said Beijing was ready to buy Portuguese debt to help it through Europe's spreading debt crisis.

Echoing the International Monetary Fund and western rating agencies, Dagong also warned that the governments in the United States, Japan and Germany will face higher pressure on debt repayment in case of inflation, economic downturns or if investors start dumping their bonds. It did not elaborate.

Ratings agency Standard & Poor's cut Japan's long-term debt rating on Thursday for the first time since 2002, and hours later Moody's Investors Service warned the risk of the United States losing its top AAA rating, although small, was rising.

The International Monetary Fund said the G7's two biggest economies needed to spell out credible deficit-cutting plans before the markets lose patience and dump their bonds.

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf