Moody’s downgrades China’s credit rating

China

China has received a downgrade on its credit score, on worries about the future state of its economy from credit rating agency Moody’s, media reports said on Wednesday.

Moody’s Investors Services brought down China’s long-term local currency and foreign currency issuer ratings by one notch to A1 from Aa3, the BBC reported.

It also changed its outlook to stable from negative.

Moody’s said China’s economy-wide debt levels were expected to increase further in the years ahead, with reforms only likely to slow the growth rate, a CNBC report added.

The credit rating agency estimated the Chinese government debt burden to rise toward 40 per cent of its GDP by 2018.

However, China’s Finance Ministry said Moody’s was exaggerating the mainland’s economic difficulties and underestimating reform efforts.

The downgrade could raise the cost of borrowing for the Chinese government, the BBC said.

Moody’s said in a statement that the downgrade reflected expectations that China’s financial strength would “erode somewhat over the coming years, with the economy-wide debt continuing to rise as potential growth slows”.

The Chinese economy expanded by 6.7 per cent in 2016 compared with 6.9 per cent in 2015, the slowest growth since 1990.