US Creditworthiness in Question as China’s CCXI Lowers Rating Amid Fiscal Uncertainties

China Chengxin International Credit Rating Co. (CCXI), a joint venture with Moody’s Investors Service, has lowered the US credit rating from AAA to AA+ with the potential for further future downgrades.

In a recent statement, CCXI warned that the political brinkmanship over the US debt ceiling could lead to policy uncertainty and weaken economic confidence, igniting further volatility in US politics and the economy. While the agency anticipates a debt-ceiling deal to be reached, it foresees potential risks leading to deterioration of the US’s creditworthiness.

On the other hand, global credit-rating agencies like Fitch Ratings Inc. and DBRS Morningstar have only put their US ratings on watch for potential downgrade. Moody’s Investors Service noted that the mid-June interest payment on Treasuries will be crucial if the US wants to keep its AAA rating going forward. CCXI, jointly owned by Beijing Zhixiang Information Management Consulting Co. and Moody’s, has warned of multiple challenges faced by the Federal Reserve’s policy stance amidst the recent banking crisis, possibly leading to increased economic volatility.

The backdrop of this move is the ongoing negotiations between Republican and White House representatives, which are aimed at reaching an agreement to raise the debt limit and curtail government spending for at least two years. CCXI’s rating adjustment coincidentally comes amid escalating tensions and competition between the US and China.

Both countries have been blaming one another of committing “economic coercion,” with Beijing using the debt-ceiling dispute to accuse the US of seeding financial volatility around the globe. Furthermore, there has been increased friction over Taiwan’s status and security, China’s support for Russia following its invasion of Ukraine, and Washington’s increasing use of sanctions.

Information for this briefing was found via CCXI and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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