Moody’s revises China’s credit rating outlook to Negative
Shafaq News/ Moody’s changed the Chinese government credit ratings from “stable” to “negative,” citing fears that growing debt may harm the economy, state budget, and institutional system.
Moody’s maintained China’s “A1” long-term rating, with a negative outlook due to concerns about the effectiveness of the Chinese authorities’ support measures for the local governments in distress and the state-owned enterprises that affect the total economy resilience.
Accordingly, Moody’s predicts that China’s growth will slow to 4% in these two years. Weak demographics are expected to be one of the structural factors that will push this figure down to 3.5% by 2030. Downgrade spotlights existing worries arising from the debt crisis escalating, particularly for the country’s property development sector.
Moody’s stated that this was reflected in the medium-term structural slowdown in economic growth and scaling down of the property industry. The agency also outlined policy effectiveness issues, sovereign balance sheets, macroeconomic imbalances, and moral hazard.
On its part, China’s Finance Ministry expressed dissatisfaction with Moody’s decision. The ministry dismissed concerns on the future of the Chinese economy about growth opportunities and the issue of fiscal sustainability arguing despite prevailing adverse external conditions, the country’s macroeconomic dynamics have demonstrated robustness and continued progress.
