Significance

Making history: The significance lies in the fact that it has made lain bare the laws of the evolution of credit risks for the global credit rating industry.


Defining the role of the industry: Economic progress is driven by two forces, or two sets of contradiction: how production and credit can work on each other, and how credit and credit rating can work on each other. The former is a pro-cyclical force, while the latter counter-cyclical force. Based on this discovery, Dagong is focused on examining the above-mentioned three types debt repayment ability and their grade of security, and has set an example by adopting a counter-cyclical mission. This is the first time in history that the credit rating industry is assigned to a counter-cyclical role to play, namely to help prevent the unbridled expansion of credit and the socio-economic turmoil that a credit crisis is likely to incur.


Defining the logic of credit rating: Also for the first time in history, Dagong has built a full-fledged theoretical system about credit rating and what it does: It is a process to reveal all the factors and risks to affect the debt repayment ability.


Defining deviation: Dagong believes that wealth creation ability is the fundamental source of solvency. Other than that, all debt repayment sources are deviationist and signal uncertainty by nature. The larger the deviation, the higher the risk level is. Dagong has for the first time in history clarified the concept of deviation, and by doing so pointed out the way for credit rating to prevent the abuse of credit and to play its counter-cyclical role more effectively.


Dagong’s innovative methodology has significance in three levels. On the first level, it has proposed for the credit rating industry in the world a correct direction for progress, most importantly a useful replacement of the erroneous concept that used to mislead the traditional credit rating practice.


On the second level, redefining the role of credit rating as a counter-cyclical force is bound to give rise to an encompassing change in the global credit rating criteria, helping the industry provide a better service in identifying the economy’s risk factors and facilitating its healthy growth.


On the third level, Dagong’s methodology can help society change its understanding of the industry and may encourage more people, independent thinkers in particular, to borrow ideas from Dagong and to pay more attention to such ideas as credit and credit risk.