Moody Shifts China Credit Outlook: Moody’s, a renowned credit ratings agency, has made a significant adjustment to its outlook on China’s government credit ratings, shifting it from stable to negative. While maintaining China’s A1 long-term local and foreign-currency issuer ratings, this move is prompted by concerns over lower medium-term economic growth and the ongoing contraction of the property sector. The negative outlook reflects a growing expectation that Chinese authorities may need to extend financial support to debt-laden local governments and state-owned enterprises, presenting broader risks to China’s fiscal, economic, and institutional strength.
Moody’s highlighted the increased risks associated with structurally and persistently lower medium-term economic growth, coupled with the continued downsizing of the property sector. China, as the world’s second-largest economy, has encountered challenges in mounting a robust post-COVID recovery this year. A combination of factors, including a deepening crisis in the housing market, risks associated with local government debt, slow global growth, and geopolitical tensions, has hampered the country’s economic momentum.
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Despite implementing a series of policy support measures, their impact has been modest at best, intensifying pressure on Chinese authorities to consider additional stimulus measures. The Finance Ministry of China expressed disappointment with Moody’s downgrade, asserting that the Chinese economy will maintain its rebound and positive trend. Moreover, the ministry emphasized that risks emanating from the property sector and local governments remain under control.
While China appears on track to achieve its annual growth target of around 5% this year, Moody’s anticipates a slowdown in annual economic growth to an average of 3.8% from 2026 to 2030. The credit ratings adjustment underscores the complex economic challenges facing China and the delicate balance required in navigating its financial landscape. This development adds a layer of complexity to China’s economic strategy, signaling the need for careful consideration and potentially more assertive policy responses in the coming years.
Our Reader’s Queries
What is the economic outlook for Moody’s China?
According to Moody’s, China’s GDP growth is predicted to reach 4.0% in both 2024 and 2025, and then average at 3.8% from 2026 to 2030. This is due to structural factors such as weaker demographics, which will lead to a decline in potential growth to approximately 3.5% by 2030.
What is the economic outlook for China in 2024?
China’s economic growth continues to weaken, with a projected expansion of only 4.5% in 2024. This is the slowest rate of growth in over 30 years, excluding the pandemic-affected years of 2020 and 2022. The impact of China’s slowdown is being felt globally, further contributing to the uncertain economic outlook.
What is the outlook for the Chinese economy?
China’s economic growth is expected to soar in the coming years, with the International Monetary Fund projecting a 5.4% increase by 2023. This positive outlook is shared by major financial institutions such as JPMorgan Chase, UBS, and Deutsche Bank, who have all raised their estimates for China’s economy to exceed 5.4%. These developments are a testament to China’s resilience and potential as a global economic powerhouse.
What is China credit rating?
Moody’s Agency Rating Outlook for DBRSA is A1 Negative, while DBRSA (high) has a Stable outlook. Additionally, 30 more rows of ratings are available.