French Prime Minister Dominique de Villepin who is also the chairman of the International Advisory Council of UCRG delivers a speech at the World Credit Rating Forum in Beijing on June 29, 2015. (Photo/Xinhua)
China is calling for a new international credit rating system that is objective, just, rational and balanced.
The calls come as political leaders and business insiders gather at the World Credit Rating Forum here in Beijing.
Economic experts say global credit chains have become more vulnerable and the world is facing the challenge of another credit crisis.
Guan Jianzhong, Chairman of Universal Credit Rating Group or UCRG points out that the forum is being held to raise awareness of the flaws of the incumbent world rating system and to promote reform of the system.
"The credit rating practice that has been proven as faulty in the credit crunch is still playing a leading role in directing international capital flow. In this context, increasing credit bubbles are very likely to trigger another worldwide credit crisis."
He adds accusations on the faulty credit rating system have yet to be converted into a worldwide consensus and commitment to a global rating system reform.
In this case it is imperative for the international community to reach a consensus to building a renewed international rating system.
His appeal is echoed by former French Prime Minister Dominique de Villepin who is also the chairman of the International Advisory Council of UCRG.
Dominique believes that it's imperative to take the initiative because the world's economy is facing threats as never before.
"The first threat is dependency on debt that has in no way been reduced since 2008. Public debts keep growing despite the austerity policies particularly in Europe.
Greece remains today an important political issue. The country is unable to pay for its debts without further destruction and damage for the Greek people. But the country is still unable to default on its debt because remaining in the Euro zone it will not boost its economy by a strong devaluation."
Dominique points out that private and public debts are creating financial threats all over the world.
He adds the failure of risk evaluation has led the world to the situation it finds itself in today, while noting that the world's current credit rating system is highly monopolistic, with the top three raters all from the United States.
"The existing credit rating system is dominated by the big three credit rating companies S&P, Moody's and Fitch . They are all U.S.-based who represent 96 percent of the rating's market. The existing system has failed in many ways. This risk evaluation has proved inefficient in the past in assessing the risks. These ratings are prove to have a pre-cyclical effect in the financial crisis, too high ratings before the crisis have produced speculative effects while quick down grading after the crisis in order to protect the credibility of the rating agencies has led to deepen the downward trend. "
To face these difficulties and challenges, China's vice finance minister Zhu Guangyao notes that the country is ready to work with all other countries to push for the perfection of the existing credit rating system and the establishment of an Asian credit rating system and standards that suit regional characteristics.
"Our basic policy is to protect and perfect the existing global financial system to make it better promote global economic growth and the stability of the International financial market."
Former Pakistani Prime Minister Shaukat Aziz, former Australian Prime Minister Kevin Rudd and former Russian Foreign Minister Igor Ivanov are also present at the meeting. The international guests are members of the International Advisory Council for the UCRG.
The Forum will last into Tuesday while proposals including the establishment of an International rating regulatory systems and innovations regarding rating theory and criteria are also under discussion.
