China Accuses Moody’s of Bias: ‘No Need to Worry, Economic Growth Remains Strong’

Moody’s Downgrades China’s National Credit Rating Outlook
China’s Economic Performance and International Forecasts

International credit rating agency Moody’s downgrades China’s national credit rating outlook from stable to negative. In response, Chinese authorities have stated that “long-term positive fundamentals of the country’s economy have not changed.”

During a regular briefing on the 6th, Wang Wenbin, spokesperson for China’s Ministry of Foreign Affairs, emphasized that the nation’s macroeconomic recovery is actively underway this year. He highlighted the steady progress in high-quality development and mentioned China’s ongoing commitment to deepening reforms. Wenbin also expressed confidence in the country’s ability to respond effectively to various risks and challenges.

He also mentioned that this year, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have raised China’s economic growth rate to 5.4% and 5.2%, respectively. He explained that many international organizations are upgrading their forecasts for China’s economic growth this year.

Spokesperson Wang emphasized, “Concerns expressed by Moody’s over China’s economic prospect and fiscal sustainability are unnecessary.” He added, “China has become a synonym of the best investment destination. The “next China” is still China. We invite businesses from across the world to invest and cultivate success in China.”

Moody’s maintained China’s national credit rating at the fifth-highest level of A1 yesterday but downgraded the credit rating outlook from stable to negative.

National Development and Reform Commission’s Response

In response to a journalist’s inquiry regarding the outlook of China’s economy, an official from the National Development and Reform Commission, the department overseeing China’s macroeconomic policies, underscored the positive performance of macroeconomic indicators. The official pointed out that these indicators yield relatively favorable results, highlighting a promising economic trend.

This person mentioned positive economic indicators such as the GDP growth rate of 5.2% in the first to third quarters of this year, the consumer price increase rate of 0.4% from January to October compared to February, the urban unemployment rate in October, which fell by 0.6 percentage points to 5.0%, and the per capita disposable income in the third quarter, which increased by 5.9% compared to the same period last year.

He cited the fact that the production and business activity expectation index among the Purchasing Managers’ Index (PMI) in November rose to 55.8 for two consecutive months but did not mention that the manufacturing PMI was calculated as less than 50 for two straight months, which means a “recession phase.”

The official stressed that looking ahead, numerous positive conditions and supporting elements bode well for China’s continued economic development.

He explained that the downgrade of the national credit rating outlook reflects the increasing evidence that Chinese authorities need to provide financial support to debt-ridden local governments and state-owned enterprises, which poses a wide range of risks to China’s fiscal, economic, and institutional capabilities. He added that it reflects “structural, persistently low medium-term economic growth and the continued contraction of the real estate sector.”

Standard & Poor’s (S&P) and Fitch Maintain Stable Outlook

Following Moody’s announcement, China’s Ministry of Finance quickly voiced its disappointment. They pointed out that despite the shaky state of the global economic recovery and diminishing momentum, China’s macroeconomy has maintained a recovery trend this year. Moreover, they emphasized the steady progress in the country’s qualitative development, underscoring their commitment to economic stability.

Meanwhile, international credit rating agencies Standard & Poor’s (S&P) and Fitch maintained China’s national credit rating outlook as stable on the same day.

By. Boo Aeri