The rating agency Moody’s downgraded its credit outlook today China to negative from stable, citing lower medium-term economic development and the risk of a major correction in the country’s sprawling real estate sector.
The downgrade reflects growing evidence that authorities will have to provide financial support to over-indebted local governments and state-owned companies, creating widespread risks to fiscal, economic and institutional strength of China, Moody’s said in a statement.
“The change in outlook also reflects heightened risks associated with structurally and persistently lower medium-term economic growth and continued contraction in the real estate sector,” says the Moody’s. The Chinese Ministry of Finance announced that it was disappointed by the downgrade carried out by Moody’s and added that the Chinese economy will maintain a positive trend. He also argued that the risks to the real estate sector and to local governments are manageable.
Source: News Beast
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