China’s credit-rating outlook was lowered to negative from stable at Moody’s Investors Service, which highlighted the country’s surging debt burden and questioned the government’s ability to enact reforms just days before leaders gather to approve a five-year road map for the economy.
The government’s financial strength may come under pressure if it takes on liabilities from troubled state-owned companies, while capital outflows have limited policy makers’ scope to stimulate the weakest economy in a quarter century, the ratings company said in a statement on Wednesday. State intervention in equity and foreign-exchange markets has heightened uncertainty about the leadership’s commitment to reform, Moody’s said.
While markets shrugged off the outlook cut on Wednesday, it highlights concern among global investors that the ruling Communist Party will struggle to overhaul Asia’s largest economy at a time when capital is flowing out of the country and debt levels have climbed to an unprecedented 247 percent of gross domestic product. Chinese leaders will begin nearly two weeks of policy meetings on Saturday to map out how to tackle the nation’s economic challenges and meet the government’s goal of doubling per-capita income by 2020. Read more