Moody's downgrades China's rating

Moody's downgrades China's rating

Responding to Moody's assessment, the Chinese ministry of finance said the downgrade had been based on "inappropriate methodology" that exaggerated the country's economic difficulties, underestimated the potential of its reforms and evidenced a "lack of necessary understanding" of the country's budget laws.

Moody's has cut its credit rating for Hong Kong hours after downgrading China for rising debt levels, which it said would have "significant impact" on the Asian financial hub due to their close links.

However, it's not government debt that's concerning economists, but rather the amount of debt level of China's "state-owned enterprises" (SOEs) and debt carried by the country's local governments.

However observes believe runaway credit has accumulated to such an extent that these measures will be insufficient and the government will have to step in, leading to a leap in public debt levels.

The move comes as China tries to clean up a toxic brew of unregulated and risky lending that has for years fueled the economy's spectacular growth, although some analysts doubt Beijing's willingness to quit its debt addiction.

China's total outstanding credit climbed to about 260% of GDP by the end of 2016, up from 160 per cent in 2008, according to Bloomberg Intelligence.

Moody's changed Hong Kong's outlook to stable from negative, denoting that the risks to the city's rating are balanced.

"China will continue the process of financial deleveraging while preventing systemic financial risks as the nation has pledged to stick to the basic tone of "seeking progress while maintaining stability" this year", Scotiabank commented in its latest research report. A year ago the Chinese economy grew by 6.7% - the weakest since 1990.

It last downgraded the country in 1989.

ANZ said it sees a marginal negative influence from the downgrade on the domestic bond market as local investors are not sensitive to worldwide credit ratings, according to a report released yesterday.

This is for the first time in last twenty five years that the American agency has gone for such rating downgrade.

Major stock indexes across the European continent are dragging on Wednesday, pulled lower by news overnight that China's credit rating has been cut by ratings agency Moody's. Standard & Poor's rates China's debt a notch higher.

China is the world's second-biggest importer of both goods and commercial services, meaning its economic performance has a big knock-on impact around the world.

However, Liao said the move "makes no sense", because China's growth has improved from previous year and the threat of trade protectionism from US President Donald Trump's administration has subsided.

Related Articles

  • To many Americans, Memorial Day has lost its meaning

    This year's theme for Charlottesville's Memorial Day ceremony highlights the difference between Veterans Day and Memorial Day . Veterans groups say a growing military-civilian disconnect contributes to a feeling that Memorial Day has been overshadowed.
    Immigration agents arrest almost  200 in LA-area raids

    Immigration agents arrest almost 200 in LA-area raids

    They also could have been arrested for baseline immigration law violations: crossing the border illegally or overstaying a visa. Instead, ICE agents use targeting methods and know who they want to arrest ahead of time.
    Hostages taken at church in southern Philippines

    Hostages taken at church in southern Philippines

    Philippine President Rodrigo Duterte on Tuesday declared martial law in the south because of the militants' siege on the city. Since 2016 when Rodrigo Duterte came to power, he began to accuse the U.S. of hypocrisy and bullying.
  • GOP rep: Alleged Montana assault 'unacceptable,' but voters have spoken

    GOP rep: Alleged Montana assault 'unacceptable,' but voters have spoken

    Gianforte faced Democrat Rob Quist in the race to see who will succeed Republican Congressman Ryan Zinke's at-large seat; Mr. A supporter of Vermont Sen. "Democrats who have won statewide in Montana tend to be moderate, and Quist is no moderate".
    Make Andhra

    Make Andhra "BJPs gateway to the south": Shah tells partymen

    Hindu and Muslims are living together for centuries together in Telangana region and in Hyderabad and other places, he said. He also said, "If figures given under are proved wrong, I will resign to chief minister post", KCR said.
    Israelis mark 50 years since capture of Jerusalem's Old City

    Israelis mark 50 years since capture of Jerusalem's Old City

    If a regional peace initiative does begin to crystallize, he said, "Israel will have to pay a price, a painful, harsh compromise". The Trump Administration is said to be trying to put together a " common set of principles " from which everyone can negotiate.
  • Check gseb.org for Gujarat GSEB Class 10th results 2017

    Check gseb.org for Gujarat GSEB Class 10th results 2017

    The results, announced today, show a wide gap in the performance of students from English-medium and Gujarati-medium schools. A huge number of candidates appeared for the examination across various examination centers in Gujarat.
    UK: Manchester attack investigation still at 'full tilt'

    UK: Manchester attack investigation still at 'full tilt'

    Armed police mingled with spectators as crowds gathered to watch the runners, including mayor of Greater Manchester Andy Burnham. Late on Saturday, police in Manchester released two CCTV images of Salman Abedi from the night he carried out the atrocity.
    Republican candidate charged with assault, roiling Trump's Montana test

    Republican candidate charged with assault, roiling Trump's Montana test

    The sheriff's department said in its statement that Jacobs' injuries did not meet the legal definition of felony assault. He said of the politician's account: "The only thing that is factually correct.is my name and place of employment".
  • Stokes ton leads England to victory

    Miller was unbeaten on 71 and Morris on 36 as South Africa failed to complete a winning advantage for a second straight ODI. Next ball produced another edge, with wicket-keeper Quinton de Kock failing to hold a more hard chance.

    Brendan Rodgers backing Celtic to clinch treble

    Celtic have secured numerous records this season as they romped to a sixth Premiership title in a row and lifted the League Cup . Celtic boss Brendan Rodgers has praised Derek McInnes ahead of the Scottish Cup final with Aberdeen on Saturday.

    Iraqi forces release videos countering claims of abuse

    The incident generated backlash strong enough to halt the Iraqi government forces' six-month advance into Mosul. US reconnaissance aircraft were overhead watching the facility but also did not see the civilians, Isler said.