Ratings agency Moody’s yesterday downgraded the outlook on China’s credit rating to “negative” from “stable” on the back of rising debt in the world’s second-largest economy.
China’s post-COVID-19 pandemic recovery has been hampered by weak consumer and business confidence, a persistent housing crisis, record youth unemployment and a global slowdown that is weighing on demand for the country’s goods.
Those woes have piled pressure on central and local governments to step in with more financial support following a 1 trillion yuan (US$141.1 billion) sovereign bond issuance by Beijing in October.
Photo: EPA-EFE
Moody’s said its decision “reflects rising evidence that financial support will be provided by the government and wider public sector to financially stressed regional and local governments and state-owned enterprises.”
This was “posing broad downside risks to China’s fiscal, economic and institutional strength,” it said.
The move “reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” it added.
China’s vast property sector is mired in a deep debt crisis, with some of the nation’s biggest developers owing hundreds of billions of dollars and facing bankruptcy.
Construction and real estate account for about a quarter of China’s GDP.
Moody’s said it expected the economy to grow 4 percent next year and in 2025, “with structural factors including weaker demographics driving a decline in potential growth to around 3.5 percent by 2030.”
“Substantial and coordinated reforms will be needed for consumption and higher value-added production to drive growth” to offset the diminished role of the property sector, it added.
The Chinese Ministry of Finance said it was “disappointed with Moody’s decision.”
“Moody’s concerns about China’s economic growth prospects and fiscal sustainability are unnecessary,” a ministry spokesperson said, adding that China’s macroeconomy has continued to recover.
TRADE WAR: Tariffs should also apply to any goods that pass through the new Beijing-funded port in Chancay, Peru, an adviser to US president-elect Donald Trump said A veteran adviser to US president-elect Donald Trump is proposing that the 60 percent tariffs that Trump vowed to impose on Chinese goods also apply to goods from any country that pass through a new port that Beijing has built in Peru. The duties should apply to goods from China or countries in South America that pass through the new deep-water port Chancay, a town 60km north of Lima, said Mauricio Claver-Carone, an adviser to the Trump transition team who served as senior director for the western hemisphere on the White House National Security Council in his first administration. “Any product going
TECH SECURITY: The deal assures that ‘some of the most sought-after technology on the planet’ returns to the US, US Secretary of Commerce Gina Raimondo said The administration of US President Joe Biden finalized its CHIPS Act incentive awards for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), marking a major milestone for a program meant to bring semiconductor production back to US soil. TSMC would get US$6.6 billion in grants as part of the contract, the US Department of Commerce said in a statement yesterday. Though the amount was disclosed earlier this year as part of a preliminary agreement, the deal is now legally binding — making it the first major CHIPS Act award to reach this stage. The chipmaker, which is also taking up to US$5 billion
High above the sparkling surface of the Athens coastline, the cranes for building the 50-floor luxury tower centerpiece of Greece’s future “smart city” look out over the Saronic Gulf. At their feet, construction machinery stirs up dust. Its backers say the 8 billion euro (US$8.43 billion) project financed by private funds is a symbol of Greece’s renaissance after the years of financial stagnation that saw investors flee the country. However, critics see it more as a future “ghetto for the rich.” It is hard to imagine that 10km from the Acropolis, a new city “three times the size of Monaco”
STRATEGIC MATERIALS: Taiwan’s advanced chips and tech help the US ‘stay ahead of China in technology competitions,’ central bank Governor Yang Chin-long said The incoming administration of US president-elect Donald Trump is unlikely to impose stiff tariffs on Taiwan’s advanced chips as well as information and communications technology (ICT) products, because they are special and strategic materials the US needs, central bank Governor Yang Chin-long (楊金龍) said yesterday. “Trump’s trade policies may affect Taiwan’s economy and financial markets through multiple channels... We need to be careful in dealing with monetary policy and foreign exchange,” Yang said at a meeting of the legislature’s Finance Committee in Taipei. After Trump’s return to the White House in January next year, it might become normal for Taiwan to be
RSS