Moody’s Downgrades China’s Credit Outlook to Negative over Debt Concerns

Moody’s downgraded its outlook on China’s government credit ratings to negative, seeing debts from Beijing’s support measure to pressure its fiscal, economic and institutional strength.

Moody’s, who is the world’s top rating agencies, expects China’s GDP to grow 4.0% in 2024 and 2025, while giving a forecast for long-term growth with an average rate of 3.8% from 2026 to 2030. Additionally, structural factors including weak demographics will drive a decline to 3.5% by 2030, it said.

The rating agency expects China’s real estate sector to remain weak due to the ongoing crisis. This leads to the downgrade of the Government’s credit ratings outlook to “negative” from “stable” on rising debt, while affirming China’s A1 long-term rating on the country’s sovereign bonds.

The downgrade underlines concerns over rising debt levels and the impact on economic growth in China as the government needs to rely on fiscal stimulus to boost the economy as well as mitigating the debt crisis in the property sector.

After the review by Moody’s, China’s Finance Ministry expressed his disappointment with the downgrade decision. The ministry said that China’s macro economy has continued to recover amid unstable global economic recovery and weakening momentum.

This came after the downgraded outlook on the US government’s ratings to “negative” from “stable” in early November. Moody’s said that it expects the US’ fiscal deficits will remain very large, which will significantly weaken debt affordability.