Moody’s downgrades China rating for the first time since 1989

Moody’s Investors Service downgraded China’s credit ratings for the first time in nearly 30 years on Wednesday.

It expects the financial strength of China’s economy will erode in coming years as growth slows and debt continues to rise.

The long-term local and foreign currency issuer ratings dropped from to A1 from A3. However, it still remains comfortably within the investment grade rating range.

The Chinese government is grappling with the challenges of rising financial risks stemming from years of credit-fuelled stimulus.

“The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,” the rating agency said in a statement, changing its outlook for China to stable from negative.

Moody’s said it expects the government’s direct debt burden to rise gradually towards 40 percent of GDP by 2018 and “closer to 45 percent by the end of the decade.”

A growing number of economists believe that a massive bank bailout may be inevitable in China as bad loans mount.

China’s Finance Ministry said the downgrade was based on “inappropriate methodology.”

China’s Shanghai Composite index .SSEC fell more than 1 percent in early trade before paring losses, while the yuan currency in the offshore market CNH=D3 briefly dipped nearly 0.1 percent against the U.S. dollar after the news.

The Australian dollar AUD=, often see as a liquid proxy for China risk, also slipped.

 

 
 
 

Ex-FBI Deputy Director Knew About CNN ‘Dossier’ Story in Advance

Ex-FBI Deputy Director Knew About CNN ‘Dossier’ Story in Advance
Former FBI Deputy Director Andrew McCabe knew in advance that CNN was about to publish its story regarding ...
READ MORE >
 

China, US Near Deal on ZTE Reprieve; Beijing Cuts Auto Tariffs

China, US Near Deal on ZTE Reprieve; Beijing Cuts Auto Tariffs
BEIJING—Washington neared a deal to lift its ban on U.S. firms supplying Chinese telecoms firm ZTE, sources said ...
READ MORE >
 

South Korean Leader Optimistic About Trump’s Meeting With Kim

South Korean Leader Optimistic About Trump’s Meeting With Kim
South Korean President Moon Jae-in met with President Donald Trump at the White House on Tuesday, May 22, ...
READ MORE >
 

Foreign Media Arrive in North Korea To Witness Nuclear Shutdown

Foreign Media Arrive in North Korea To Witness Nuclear Shutdown
BEIJING—About two dozen journalists from Western and Chinese news organizations arrived in North Korea on Tuesday to witness ...
READ MORE >