Global ratings agency Moody's Investors Service downgraded the outlook on China's credit rating to "negative" from "stable," citing expectations of lower medium-term economic growth and risks from a deep correction in the country's vast property sector.
"The change to a negative outlook 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, posing broad downside risks to China's fiscal, economic, and institutional strength," Moody's said in a note.
Moody’s affirmed China’s A1 long-term local and foreign-currency issuer ratings and said it expects the country’s annual gross domestic product (GDP) growth to be 4% in 2024 and 2025 and an average 3.8% from 2026 to 2030.
China’s Finance Ministry said it is ‘disappointed’ by Moody’s downgrade of ratings outlook and added that the country’s economy “will maintain its rebound and positive trend”.
Moody's downgrade comes a day after another investment rating firm, S&P Global, cited China's woes at home and abroad, particularly its "worsening property crisis."
"We think a worsening of the property crisis (which assumes a further 20%–25% decline in 2024 property sales from 2022) could push China’s economy—long the engine of global GDP growth—below 3% in 2024, compared to our base case of 4.6%," S&P Global said in its report titled "Global Credit Outlook 2024: New Risks, New Playbook," while adding that “this pain in the property market is dragging on China's economic rebound and driving downside risk."
S&P Global expects China's property sales to track an extended L-shaped recovery in 2024.
China's property sales continue to see a downturn despite Beijing's recent support efforts. Property sales by floor area fell 20.33% year-on-year against a 19.77% fall in September, according to the news agency Reuters. Sales fell 7.8% year-on-year in January–October, compared with a 7.5% slide in the first nine months of 2023, it added.
Chinese authorities have been ramping up measures to support real estate, including easing limits on home buying and reducing borrowing costs.
First Published: Dec 5, 2023 2:30 PM IST
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