China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

China’s Dagong Global Credit Rating Co. may cut the U.S.’s sovereign rating for the second time since August if the world’s biggest economy conducts more large- scale asset purchases.
Dagong, based in Beijing, lowered the U.S. sovereign rating one level to A on Aug. 3, on par with Russia and South Africa, after saying America’s decision to raise the debt ceiling will precipitate a national crisis. Investors have been speculating the U.S. will conduct a third-round of quantitative easing, or QE3, to boost an economy hurt by job losses.

“If the U.S. adopts more quantitative easing policies, we may downgrade or put it on the negative watch list,” Zhang Jun, general manager of Dagong’s marketing division, said by phone today. “We are closely monitoring it.”
The U.S. central bank purchased $2.3 trillion of debt to spur the economy in two earlier rounds of quantitative easing. Federal Reserve Vice Chairman Janet Yellen said Oct. 21 a third round might become warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil.

Quantitative easing will cause the dollar to weaken, which may in turn bring about a default, Zhang said. He declined to say whether a formal report will be published.
Fed officials are probably engineering additional asset purchases, according to economists surveyed by Bloomberg between Oct. 26 and 31. Sixty-nine percent said Chairman Ben S. Bernanke will embark on a third round of quantitative easing, with 36 percent predicting the move will come in the first quarter next year, according to the survey.