HONG KONG (AP) \u2014 Credit rating agency Moody\u2019s cut its outlook for\u00a0Chinese sovereign bonds\u00a0to negative on Tuesday, citing risks from a slowing economy and a crisis in its property sector.<\/p>\n\n\n\n
Moody\u2019s said the downgrade, its first for\u00a0China\u00a0since 2017, reflects risks from financing troubles of local and regional governments and state-owned enterprises.<\/p>\n\n\n\n
The world\u2019s second-biggest economy had been slowing before a 2020 crackdown on excessive borrowing brought on defaults by dozens of property developers. Those troubles have crimped local government finances and also imperiled some lenders, further dragging on the economy.<\/p>\n\n\n\n
The need for government intervention to support banks and local governments poses \u201cbroad downside risks to China\u2019s fiscal, economic and institutional strength. The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth,\u201d Moody\u2019s said in a statement.<\/p>\n\n\n\n
China\u2019s Ministry of Finance said it was \u201cdisappointed\u201d with Moody\u2019s decision to lower the outlook.<\/p>\n\n\n\n
\u201cSince the beginning of this year, in the face of the complex and harsh international situations, and against the background of an unstable global economic recovery and weakening momentum, China\u2019s macro economy has continued to recover and has been advancing steadily,\u201d the ministry said, according to an online transcript of remarks at a Q&A session Tuesday.<\/p>\n\n\n\n
Shares retreated in China on Tuesday, with Hong Kong\u2019s Hang Seng dropping 1.9% and the Shanghai Composite index down 1.7%.<\/p>\n\n\n\n
Separately, Moody\u2019s affirmed China\u2019s A1 long-term local and foreign-currency issuer ratings.<\/p>\n\n\n\n
The credit rating firm said it expects China\u2019s economy to grow at a 4% annual pace in 2024 and 2025, slowing to an average of 3.8% for the rest of the decade.<\/p>\n\n\n\n
Factors such as \u201cweaker demographics,\u201d as the country ages, will likely drive a decline in potential growth to around 3.5% by 2030, Moody\u2019s said.<\/p>\n\n\n\n
To offset the weaker property sector, China will need \u201csubstantial and coordinated reforms\u201d to support more consumer spending and higher value-added manufacturing to support strong growth, Moody\u2019s said.<\/p>\n\n\n\n
China\u2019s recovery from the COVID-19 pandemic faltered after an initial burst of activity earlier in the year faded faster than expected. Despite prolonged weakness in consumer spending and exports, the economy is expected to grow at about a 5% annual pace this year.<\/p>\n\n\n\n
China\u2019s economy still has \u201chuge development resilience and potential\u201d and will remain an important engine for global economic growth in the future, the Finance Ministry said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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