The Moody’s announcement, meanwhile, put a spotlight on China’s debt issues. While the agency retained a long-term rating of A1 on the nation’s sovereign bonds, it cited the usage of fiscal stimulus to support debt-laden local governments and the spiraling property downturn as risks.
The pushback from China generally followed a theme: Moody’s just doesn’t know this economy.
- “The rating agency’s understanding of how the Chinese economy works and how the Chinese government functions is not deep enough and does not reflect the reality,” Feng Qiaobin, a deputy director of macroeconomic research at a department under the State Council, was quoted as saying in one state-backed newspaper. She told the publication that the cut was based on outdated information.
- State broadcaster China Central Television echoed that criticism in a report published on Wednesday, saying the change was based on “misjudgments” over the nation’s growth potential and government debt issues. Citing experts, the report said Moody’s and other global ratings agencies have historically been overly harsh toward emerging markets.
- Wednesday’s state media reports came a day after an initial statement from the Ministry of Finance, which shortly after Tuesday’s cut defended the economy as one that is “highly resilient and has large potential.” The property downturn is well under control, the agency added.
Pick a team. Who’s gonna be right?