Dagong downgrades US sovereign credit rating

China’s credit rating agency Dagong downgraded sovereign credit rating of the United States by one notch from A- to BBB+ on Tuesday, as debt repayment capacity is expected to continue to deteriorate with its massive tax cuts plan.

The company has given sovereign credit rating to the US nine times since 2010, and the rating has slipped from AA in 2010 to BBB+ this year.

“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 Global Credit Company said, after the US voted to pass the tax cut plan in November.

Expected slower growth of fiscal revenue and rising demand for national defense, infrastructure and rigid spending will put higher downward pressure on the government’s repayment capacity, according to the agency.

It is estimated that ratio of fiscal revenue-to-debt of the federal government will be 14.9 percent and 14.2 percent in 2018 and 2019 respectively, and the ratio will deteriorate to 12.1 percent in 2022, the agency said.