Moody’s Analytics cut its outlook for China to negative

Mar 2, 2016 12:07 IST

US ratings agency Moody's Analytics in the first week of March 2016 cut its outlook for China from ‘stable’ to ‘negative’.

It was based on expectations that fiscal strength of Beijing would be sliding down and the negative outlook comes on the heels of fresh data suggesting economy of China is continuing to lose steam.

During the reaffirmation process of its current debt rating, Moody’s has alerted to have reforms to avoid a downgrade.

Highlights of Moody’s Report

• Without credible and efficient reforms, China's GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavourable.

• The Agency put forward its concern over incomplete implementation of much needed reforms by China.

• Government debt would increase more sharply beyond expectations

• By saying that there was still time to address the current economic imbalances and implement reforms, the agency confirmed current rating of China as Aa3.

Short note on Economy of China

• China's economy is the second-largest in the world following United States of America.

• It is growing at the slowest rate in 25 years as it attempts to move from an export-led nation to one led by consumption and services.

• The slowdown in China's economy has created considerable uncertainty in financial markets and has led to sharp falls in commodity prices.

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