China has been downgraded by Moody’s for the first time since 1989 sending worrying messages to the rest of the world.
Expectations that the country’s financial strength will deteriorate in coming years was cited as a primary reason for downgrading the Asian powerhouse.
Rising debt and a cooling economy were also referenced as reasons for downgrading China’s rating to A1 from Aa3 and changing its outlook from stable to negative.
According to Mihir Kapadia, CEO and Founder of Sun Global Investments, Moody’s said that the downgrade reflects its expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows.
While the credit rating agency acknowledged that China is likely to transform its economy and financial system over time, it believes that China cannot prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.
The agency also expects the erosion in China’s credit profile to be gradual and eventually contained as reforms deepen. As may have been expected, China has aggressively countered Moody’s claims.
Since you are here
Since you are here, we wanted to ask for your help.
Journalism in Britain is under threat. The government is becoming increasingly authoritarian and our media is run by a handful of billionaires, most of whom reside overseas and all of them have strong political allegiances and financial motivations.
Our mission is to hold the powerful to account. It is vital that free media is allowed to exist to expose hypocrisy, corruption, wrongdoing and abuse of power. But we can't do it without you.
If you can afford to contribute a small donation to the site it will help us to continue our work in the best interests of the public. We only ask you to donate what you can afford, with an option to cancel your subscription at any point.
To donate or subscribe to The London Economic, click here.
The TLE shop is also now open, with all profits going to supporting our work.
The shop can be found here.
You can also SUBSCRIBE TO OUR NEWSLETTER .
