Moody’s downgrades China’s rating to A1 from Aa3, changes outlook to Stable from Negative
|Ratings agency Moody’s has downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to Stable from Negative.
Moody’s rationale for the rating downgrade
Rising debt will erode china's credit metrics, with robust growth increasingly reliant on policy stimulus
Looking ahead, we expect China's growth potential to decline to close to 5% over the next five years, for three reasons. First, the capital stock formation will slow as investment accounts for a diminishing share of total expenditure. Second, the fall in the working age population that started in 2014 will accelerate. Third, we do not expect a reversal in the productivity slowdown that has taken place in the last few years, despite additional investment and higher skills.
The reforms will not fully offset the rise in economic and financial risk
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