The downgrade reflects growing evidence that authorities will need to provide financial support to over-indebted local governments and state-owned companies, thereby creating widespread risks
Ratings agency Moody’s today downgraded China’s debt outlook to negative from stable, citing weaker medium-term economic growth and the risk of a major correction in the country’s sprawling property sector.
The downgrade reflects growing signs that authorities will need to provide financial support to over-indebted local governments and state-owned companies, posing widespread risks to China’s fiscal, economic and institutional strength, Moody’s said in a statement.
“The change in outlook also reflects heightened risks associated with structurally and persistently lower medium-term economic growth and continued contraction in the real estate sector,” Moody’s said.
The Chinese Ministry of Finance announced that is disappointed by Moody’s downgrade and added that the Chinese economy will maintain a positive trend. He also argued that the risks to the real estate sector and to local governments are manageable.
Source :Skai
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