‘STRUCTURAL REFORMS

Get bal­loon­ing credit in check or an­other rat­ing cut is pos­si­ble, says Moody’s

New Straits Times - - Business World -

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

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