China has credit rating cut amid rising debt fears

CHINA’S credit score has been downgraded for the first time since 1986 by ratings agency Moody’s as fears grow over its surging debts.

Analysts warned businesses, households and the state were now sitting on debt equal to 256 per cent of national output – with this figure expected to rise. Economists have long fretted over the damage a recession in China – the world’s second largest economy – would do to global economic health.

Cutting China’s rating one notch from A1 to Aa3, Moody’s warned economic reforms by the Communist authorities ‘will not have sufficient impact, sufficiently quickly, to contain the erosion of credit strength’. It also said growth would fall from 6.7 per cent in 2016 to 5 per cent over the next five years.

But China’s finance ministry said Moody’s was being too pessimistic about its economic prospects, with much of the debt held by state-run companies.