All the day’s economic and financial news, as Beijing hits back after being downgraded to just Aa3 by Moody’s
- Moody’s: China’s financial strength is fading
- China: No it’s not
- First downgrade in almost 30 years
- Shares fall in Shanghai
- Coming up: Mario Draghi speech; Fed minutes
The Chinese government has tried to dismiss Moody’s downgrade.
It claims the move is based on an inappropriate, “pro-cyclical” approach, that is too gloomy about China’s current situation and future potential.
“These viewpoints overestimate the difficulties facing the Chinese economy and underestimate the capabilities of China to deepen supply-side structural reform and expand overall demand.”
Big news from China this morning. Moody’s has downgraded the country’s credit rating for the first time in almost three decades.
Moody’s warned that China’s financial strength is likely to deteriorate in the coming years, as its economy slows and its national debt keeps rising.
The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows.
“While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.”
“Moody’s expects that economy-wide leverage will increase further over the coming years. The planned reform program is likely to slow, but not prevent, the rise in leverage.
The importance the authorities attach to maintaining robust growth will result in sustained policy stimulus, given the growing structural impediments to achieving current growth targets. Such stimulus will contribute to rising debt across the economy as a whole.”
#China stocks and currency got hit by Moody’s rating downgrade. Shanghai Comp drops to lowest since Oct. pic.twitter.com/YUxL4xGZuw