(Yicai Global) June 30 -- A Harvard-trained Chinese economist sharply criticized at the Summer Davos Forum international credit rating agency Moody's recent downgrading of China's credit. "Moody's downgrading of China is just like 'a short man who does not play basketball criticizing Michael Jordan,' and cannot be taken seriously," said Li Daokui, a former monetary committee member at the People's Bank of China (PBOC), China's central bank.
In an exclusive interview with Yicai Global, Li said Moody's has been operating in the United States for about 100 years and that its analysis on America, local companies and local debt would be naturally right and that we do not doubt it.
But, he pointed out, for an emerging market and for analysis of markets like China, Moody's would not know more than those people or institutions specializing in the industry. Therefore, the market's focus on Moody's rating of China's economy, instead of a more authoritative research, is irrational, he said.
For example, a senior fellow at the Brookings Institution in the US, Eswar Prasad, and Li Jing of JPMorgan are more professional than Moody's and Moody's can't afford to employ them, Li suggested, calling the two experts "arguably the superstars in the analysis of China's economy and finance." Comparable to LeBron James in the basketball court, or Michael Jordan, Moody's analysts who comment on China's economy are just like those who haven't even touched a basketball, yet comment on basketball, Li claimed.
Moody's is not familiar with China and other emerging-market countries because their research efforts are far behind, Li Daokui stated. They assign three, four or five new MBA graduates for each region they analyze and make them comment on behalf of Moody's. Clearly, such new graduates cannot have a deep understanding of the Chinese economy, he said.
If the international credit rating agencies like Moody's rated China's economy from the beginning over the past 40 years, they would have graded it as junk to start with, and they would have been wrong, Li suggested. This is because China's development mechanisms are not the same as the US and even other emerging markets. The standard US set of theories are not feasible to analyze China, he stressed.