China's stocks, Yuan erase losses triggered by Moody's downgrade

China's stocks, Yuan erase losses triggered by Moody's downgrade

A spokesman for the Ministry of Finance said Moody's report "overestimated the difficulties faced by China's economy, and underestimated the Chinese government's capability to deepen the supply side structural reform and moderate expansion of gross demand".

Hong Kong on Thursday hit back at a decision by Moody's to cut its credit rating on the city, which the agency said was becoming increasingly close to mainland China.

China's potential economic growth was likely to slow toward 5 percent in coming years, but the cooldown is likely to be gradual due to further doses of fiscal stimulus, Moody's said.

Mei said China's economic performance this year had exceeded market expectations and criticized Moody's for including debt at state-owned enterprises (SOEs) and local government financing vehicles as indirect government liabilities. The ministry added: "China's government debt risks will not change dramatically in the period of 2018-20 from 2016".

China's economy has for always been fuelled by economic stimulus and cheap credit and the government thereis now grappling with ways to steer the economy clear of a debt crisis as growth slows.

Western institutions and media reports have since a year ago repeatedly referred to China's credit risks. In each case, Moody's changed the outlook to stable from negative, and in each case, the rating is solidly investment grade.

The country is trying to contain financial risks and to avoid asset bubbles forming while maintaining growth.

China's stocks, Yuan erase losses triggered by Moody's downgrade

The government has trimmed its growth target for this year to about 6.5 percent after it expanded 6.7 percent last year, the slowest growth rate since 1990.

ANZ said it sees a marginal negative influence from the downgrade on the domestic bond market as local investors are not sensitive to global credit ratings, according to a report released yesterday.

Moody's cited the likelihood of a "material rise" in economy-wide debt and the burden that it will place on the state's finances.

Credit ratings agencies can be thought of as "bookies" to the financial investment community.

China's long-term local and foreign currency issuer scores have slipped from A1 to Aa3 - down one level.

After years of rapid growth, fuelled by hefty stimulus from the authorities, China now faces the dual task of dealing with the risky byproducts of this and bringing the economy on to a more sustainable footing. 'Move makes no sense' But Liao said the move "makes no sense" because China's growth has improved from previous year and the threat of trade protectionism from US President Donald Trump's administration has subsided.

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