Moody's Cuts China Credit Outlook On Low Growth, Property Risks

Moody's, the ratings agency, has downgraded its outlook on China's government credit ratings, shifting it from stable to negative.

Moody's further emphasized that the change in outlook is also a response to the escalating risks associated with structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector in China.

The move signals increasing global apprehension about the repercussions of surging local government debt and the deepening property crisis on the world's second-largest economy.

This development was reported by Gnaneshwar Rajan and Kevin Yao for Reuters.

The downgrade reflects the growing belief that Chinese authorities will need to offer more financial support to debt-laden local governments and state-owned enterprises, posing broad risks to China's fiscal, economic, and institutional strength, as stated in Moody's official statement.

Moody's further emphasized that the change in outlook is also a response to the escalating risks associated with structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector in China.

On Tuesday, China's blue-chip stocks experienced a significant drop, reaching nearly five-year lows, primarily driven by concerns about the country's economic growth. The discussion of a potential cut by Moody's contributed to the negative sentiment during the session, with Hong Kong stocks also extending losses.

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