Get ballooning credit in check or another rating cut is possible, says Moody’s
BEIJING growth slows and debt continues to mount.
In announcing the downgrade, Moody’s also changed its outlook on China from “negative” to “stable”, suggesting no further ratings changes for some time.
China has strongly criticised the downgrade, asserting it was based on “inappropriate methodology”, exaggerating difficulties facing the economy and underestimating the government’s reform efforts.
In response, senior Moody’s official Marie Diron said yesterday the ratings agency had been encouraged by the “vast reform agenda” undertaken by the Chinese authorities to contain risks from the rapid rise in debt.
However, while Moody’s believed the reforms might slow the pace at which debt was rising, they would not be enough to arrest the trend and levels would not drop dramatically, said Diron.
She said China’s economic recovery since late last year was mainly thanks to policy stimulus, and expected Beijing would continue to rely on pump-priming to meet its official economic growth targets, adding to the debt overhang.
Moody’s also was waiting to see how some of the announced measures, such as reining in local government finances, were actually implemented, said Diron, associate managing director of Moody’s Sovereign Risk Group in