TIME China

The Outlook for China’s Credit Rating Is ‘Negative,’ Says Moody’s

China's Economy - Manufacture Industry
Zhong Zhi—Getty Images A man works at a small fabric factory at Kanglecun, one of the urban villages in Guangzhou on February 29, 2016 in Guangzhou, Guangdong Province, China

The ratings agency cites "Uncertainty about the authorities' capacity to implement reforms"

The credit ratings agency Moody’s has declared that the outlook for China’s credit rating is “negative” amid growing concerns about the Chinese government’s ability to manage a slowdown of growth.

In a note Wednesday, Moody’s Investors Service said it would keep its ratings of both long-term and short-term Chinese government debt at Aa3, meaning a very low credit risk. But the outlook for the ratings had moved from “stable” to “negative” Moody’s said, blaming rising government debt and liabilities.

It said the revision was also down to “Uncertainty about the authorities’ capacity to implement reforms — given the scale of reform challenges — to address imbalances in the economy.”

China’s economy is now growing at its lowest rate for 25 years as the country’s manufacturing sector and demand for commodities slow. The government insists that it is undergoing a managed transition to a services-led economy, but the Moody’s announcement will increase the pressure on China’s leaders to push forward with reforms at the annual National People’s Congress, which begins on Saturday in Beijing.

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