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CNN
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Moody’s lowered its outlook on the Chinese government’s credit rating to negative from stable on Tuesday, citing risks to the country’s financial strength, lower medium-term economic growth and persistent problems in the real estate sector.
The rating agency said in a statement that the downgrade in its forecast reflects growing evidence that authorities will provide financial support to cash-strapped local governments and state-owned enterprises, which “poses broad downside risks to China’s financial, economic and institutional strength.” .
“The changing outlook also reflects the growing risks associated with sustained, structurally low economic growth over the medium term and the continued downsizing of the real estate sector,” she added.
Moody’s expects China’s annual economic growth rate to reach 4% in both 2024 and 2025, and an average of 3.8% annually. Structural factors, including weak demographics, could push potential growth down to around 3.5% by 2030, the report added.
It affirmed China’s long-term rating of domestic and foreign currency issues at A1.
China’s Finance Ministry said on Tuesday it was “disappointed” by Moody’s decision to downgrade the country’s credit rating.
She said in a statement: “China’s economy is shifting to high-quality development, the new engines of China’s economic growth are beginning to take effect, and China has the ability to continue to deepen reforms and respond to risks and challenges,” adding that Moody’s concerns about the country’s growth prospects and financial sustainability “ “Unnecessary.”
She added that the government has taken a series of measures to solve the risks of “hidden” debts of local governments.
“Through the joint efforts of various local administrations, the amount of domestic implicit debt gradually decreased and risks were mitigated,” the statement said.
She added that the impact of the decline in the real estate sector on local government budgets “can be controlled.”
This is a developing story and will be updated.
