Moody’s Investors Service on Tuesday affirmed China’s government’s bond rating of Aa3 but cut the outlook to stable from positive, the second pessimistic revision by a foreign
ratings agency this month, reports Reuters.
Last week, Fitch Ratings cut China’s long-term local currency credit rating to A-plus from AA-minus, citing concerns about the risk that excessive local government borrowing posed to the wider economy. Moody’s referred to the same issue in justifying its negative revision.
‘Progress has been less than anticipated in the process of both reducing latent risks by making local government contingent liabilities more transparent and in reining in rapid credit growth; therefore, some of the upward pressure on the Aa3 rating has eased,’ it said.
Moody’s said it affirmed the Aa3 rating because of China’s credit fundamentals, which have been underpinned by continued robust economic growth, strong central government finances and an exceptionally strong external payments position.
The report said more reform would be necessary to prevent a buildup of pressures that could increase the risks of a hard landing for the Chinese economy. But it credited China for maintaining better fiscal metrics than Belgium or France, and noted that China’s massive international investment position means its external assets exceed its domestic liabilities to the tune of $1.8 trillion (1.2 trillion pounds).
-With New Age input