In its first report on sovereign debt, Dagong Global Credit Rating gave US Treasury bonds a AA rating with negative outlook, several rungs below the top AAA that it gave to just seven economies, including Australia.

In contrast, the major Western ratings agencies Standard & Poor's, Moody's and Fitch regard US government bonds as the world's safest asset - a view shared by markets.

Accusing the Western agencies of bias, Dagong also issued relatively low AA- ratings to Japan, Britain and France because of their large debt loads and poor growth prospects.

It warned that these countries could face higher funding costs if they failed to cut their deficits - a situation recently faced by the governments in Greece and Portugal.

China received a AA+ rating because of its ''sustainable fiscal strength'' and more optimistic economic outlook.

S&P, on the other hand, has given the world's most populous economy an A+ rating.

Dagong says its advice is independent and impartial, but the report was launched at the headquarters of Xinhua News Agency, the ruling Communist Party's main propaganda outlet.

Eoin Treacy's view Confidence in the efficacy of US credit ratings is at a low ebb following the credit crisis and analysts, not least Fullermoney, have pointed out the conflict of interest in credit ratings agencies relying on the companies issuing the debt they are rating for their fees. There is probably a sound argument for raising the credit ratings of emerging market creditor nations, posting current account and budget surpluses but dismissing the views of established ratings agencies in favour of those of a newcomer would be a rash move. According to Dagong's website:

Dagong Global Credit Rating Co. Ltd. (hereinafter referred to as "Dagong") is a specialized credit rating and risk analysis research institution founded in 1994 upon the joint approval of People's Bank of China and the former State Economic & Trade Commission, People's Republic of China (PRC), and is also a key credit information and credit solution service provider in China.

This suggests that rather than being an independent entity Dagong is a mouthpiece for the Chinese government to air its views on the sovereign debt markets. As the largest holder of US Treasuries, this report may more of a prod towards the US administration to get serious about budgetary discipline rather than a clear reflection of where rating levels should be set for sovereign credits.