Should not take Moody’s ratings seriously, say Chinese analysts; call it 'politically-biased'

Moody’s downgrading of Chinese credit rating to negative from stable is a “politically-biased” move, said Chinese government mouthpiece Global Times, quoting economic experts. The top economic planner said that China has the confidence and the capability to achieve long-term stable development as well as bring new impetus and opportunities to the world. 

It said that the country’s strong resilience, potential, room for maneuver and sound fundamentals have not changed and will not change. China’s National Development and Reform Commission (NDRC) said that the nation will contribute one-third to the world’s economic growth this year, the report stated.

Moody’s overestimated the challenges faced by the Chinese economy and underestimated the nation’s resolve and capability boosting reforms, said Chinese analysts. The report, quoting the analysts, said that Moody's downgrading is part of the US-led campaign of bad-mouthing and smearing China’s economy. 

On Tuesday, Moody’s cut the outlook on China’s credit ratings on the back of lower medium-term economic growth and rising debt. Moody’s said that costs to bail out local governments and state firms, and control its property crisis would weigh on the world's No. 2 economy. It lowered the 'outlook' on China's A1 debt rating to "negative" from "stable" less than a month after it had done the same to the United States’ last remaining triple-A grade from a credit rating agency.

Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies under the Renmin University of China, said that China should not take Moody’s credit rating seriously as it is “widely known” that Moody’s rating on China and Chinese companies are politically biased. Dong said that Moody’s rating system has its limitations and also lacks dynamic research and in-depth understanding of China’s economic development and governance model. 

The Global Times report stated that rating agencies such as Moody’s, S&P Global Ratings and Fitch Group tend to be stricter on emerging-market economies, and get lower ratings even if their debt pressure is lower than that of developed economies. 

Another economist, Chen Fengying, former director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, said that China’s debt risk is lower compared to developed economies. 

Dong also said that instead of expressing worries on China’s finances, Moody’s should do more research on China’s development transformation. 

Moody’s will not impact the long-term upward trend of the Chinese economy, the report quoted senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, Zhou Mi.

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