FX.co ★ Moody’s downgrades China’s credit outlook

Moody's revised its outlook for China's sovereign bonds, citing rising debt and slowing economic growth. The rating agency retained its long-term A1 rating on the country’s sovereign debt but lowered the outlook to negative from stable.

According to Moody's, the change reflects rising evidence that local and regional governments as well as state-owned enterprises in China will soon face big financial troubles and will be forced to turn to the authorities for help. The organization expects China's GDP growth to stand at 4% in both 2024 and 2025 and average 3.8% between 2026 and 2030.

Of course, the world’s second-largest economy has ample resources to handle this situation, but this task is likely to be challenging. The Chinese government will need to support its financial market and severely reduce government spending, which is nearly impossible.

China's finance ministry said it was upset about the findings presented by Moody’s, adding that the Chinese economy would maintain positive dynamics by all means.

At the same time, the foreign media reports that China has tightened its information policy. Now analysts and employees of financial organizations cannot openly discuss the country’s economic woes and leave any negative comments on this matter.

Such an internal directive has already been issued by China International Capital Corporation, one of the largest investment banks in the country.

From now on, some topics such as deflation, unemployment, capital outflows from the country, as well as falling producer prices are off-limits for public discussion in China.

Amid the authorities' efforts to tighten control over reliable information, investors are increasingly dumping their Chinese investments and pulling out their money. Overseas investors have been selling China’s equities for the fourth straight month.