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Reform the International Rating System to
Promote the World Economic Recovery
Guan Jianzhong
Although the international community has adopted a series of bailout actions to the global credit crisis since 2008,
it is still uncertain about the deepening and spreading of the crisis, making it difficult to predict the prospects of
the world economy. It is the most urgent task for the contemporary human society to explore the complicated origin
of the crisis and choose the correct approach for the world economic recovery.
While studying the inherent law governing the formation, development and conclusion of the global credit crisis
from the perspective of credit relationship, one discovers that two pairs of contradictions, namely the contradiction
between production and credit and the one between credit and rating, are the impetus to drive the development
of contemporary world economy.The nature of continuous expansion of production requires that consumption
increase is promoted by increasing the credit demand, and the inherent requirement of the movement of this pair
of contradictions is the pro-cyclical development of the credit; the subjects of credit are creditors and debtors, and
the precondition for creditors and debtors to establish a credit relationship is that creditors require that ratings
are assigned for debtors on their maximum debt ceiling underpinned by their real wealth creation capability, the
inherent requirement of the movement of this pair of contradictions is the counter-cyclical development of the
credit. Therefore, of these two pairs of contradictions, credit and rating constitute the principal contradiction, and
rating is the principal aspect in the principal contradiction. The current international rating system has failed to
follow this law; rather, it violates the principle that credit increase must be based on the capability of real wealth
creation, complies with the needs of movement of the contradiction between production and the credit, and keeps
on providing creditors with wrong rating information, leading to the breakdown of international credit relationship
ultimately. The global credit crisis is a process of adjustment to the insolvent credit relationship established
according to the wrong rating information. The practice of creating virtual credit relationship by increasing credit
supply could transfer crisis only, as it can never rescue the crisis. The only way out for keeping the world economy
from precarious economic situation is to establish a new international credit rating system that embodies the
essential requirements of the credit economy and that is able to assume the rating responsibility for the whole world
and to establish the credit relationship that is supported by the capability of real wealth creation through impartial
ratings. The purpose of this paper is to pursue the correct approach for the world economic recovery.
I. The Mankind Has Entered the Societal Development Phase of Credit Economy
After World War II, the contradiction between the capitalist production and consumption promoted a world-wide
credit revolution. By world credit revolution, it means that the traditional credit model based on the real material
wealth has been modified worldwide; the consumption demand has been expanded continuously on credit and
beyond the real material wealth creation capability, in which credit relationship is integrated into the entire process
of social reproduction, making credit relationship the economic foundation of modern society, influencing the
overall economic and social activities of the humankind. The world credit revolution has experienced four stages of
development:
(I) The stage of US dollar-gold par value emerged. The US dollar –gold par value system means
Dagong Credit
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