Rating Agency Moody’s for the first time in almost 30 years has lowered long-term credit rating of China. The Agency believes that because of the rising debt in the economy and deceleration of growth of financial possibilities of China will be reduced. Beijing this assessment does not agree, writes the BBC.
Credit rating of China reduced one – from A1 to Aa3. At the same time, the Agency changed its Outlook on China from “negative” to “stable”.
The downgrade could increase the cost of foreign loans.
In a statement, Moody’s said that the financial strength of China “in the coming few years will decrease as the economy continues to grow the amount of debt and potential growth will slow.”
Moody’s believes that the level of debt reaches 40% of GDP by 2018, and by the end of the decade close to 45%.
This is the first downgrade Moody’s for the first time since 1989, when the events took place in Tiananmen square, affect the trade of China with other countries.
China’s Ministry of Finance took the downgrade in arms. According to the Agency Reuters, according to Beijing, a reassessment of the risks based on “improper methodology”.
In a statement the Chinese Finance Ministry said that Moody’s “exaggerating things,” be more appreciated when bistratose debt of China and predict stimulatory government measures to support economic growth.
Last year, the Chinese economy showed the lowest growth over the past 25 years – it was 6.9%.
In 2017, China is expecting growth in GDP of only 6.5%. The forecast contained in the plan of socio-economic development of China in 2017.
Moody’s believe that the growth will continue until the rate reaches about 5%.
The reason for this rating, Moody’s called the three factors – reduction of investment, reduction of average age of the working population and a further decline of productivity.