SYDNEY (MarketWatch) — China’s credit-rating agency on Tuesday downgraded its rating for U.S. sovereign debt and warned of further cuts, in a pointed move ahead of this week’s Group of 20 major economies meeting.

Dagong Global Credit Rating Co. Ltd., the only wholly Chinese-owed rating agency, cut its rating on U.S. debt to A from AA, citing the Federal Reserve’s move last week to initiate another round of asset buying, worth $600 billion. It also placed the U.S. sovereign credit rating on negative watch.

G-20 set to gather amid controversy

“The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar and the continuation and deepening of credit crisis in the U.S.,” Dagong said.

“Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment,” the agency said.

The Federal Reserve’s action has driven down Treasury interest rates and money has flooded into emerging markets. Concern over the U.S. asset-buying program seems to be center stage ahead of the G-20 meeting, analysts and economists say. Read G-20 summit preview.

“The Federal Reserve’s QE2 is going to face criticism at the G-20 meeting,” said analysts at Brown Brothers Harriman.

Even ahead of the meeting, some countries have spoken out against the asset-buying move by the U.S.

China’s finance Minister Xie Xuren said Tuesday that excessively loose monetary policy by major currency issuers is compounding fiscal and debt risks, while Chinese Vice Premier Wang Qishan said he believes that there is excessive global liquidity. See report on Chinese criticism on QE2.

China also stepped in with measures to curb foreign speculative capital flows on Tuesday. The State Administration of Foreign Exchange said that it will control quotas for short-term foreign debt and tighten up oversight of funds bought back into China and direct investments into China.

Tit for tat?

The downgrade of the U.S. rating by Dagong comes just over a month after the U.S. Securities and Exchange Commission denied the firm’s application to officially rate bonds in the U.S.

At that time, Dagong called the SEC’s move discriminatory and said it was considering legal action. See report on Dagong’s protest to SEC.

The SEC said in denying the application that “it does not appear possible at this time for Dagong to comply with the record keeping, production and examination requirements of the federal securities laws.”