teknolojiarsivi.com
teknolojiarsivi.com October 21, 2017


China's credit downgrade could 'reawaken risk'

30 May 2017, 06:31 | Vickie Mathis

Stocks across Europe are dipping after China's rating cut

ANZ: China's downgrade by Moody's risks creating 'a negative feedback loop'

China's Finance Ministry said the downgrade, Moody's first for the country since 1989, overestimated risks to the economy and was based on "inappropriate methodology".

It attributed the move to expectations that China's economy-wide leverage would increase over the coming years, planned reform program would likely slow, but not prevent the rise in leverage, and sustained policy stimulus would cause rising debt. In March 2016, Moody's revised down China's sovereign rating outlook to "negative", but China's economic performance turned out to be much better than projected.

Moody's, the credit rating organisation, has downgraded China's credit rating for the first time in more than 25 years due to concerns over the slowing growth and rising debt of the Chinese economy.

Third, Moody's conclusion that rises in commercial bank loans, bonds issued by Local Government Financing Vehicles, as well as investments by State-owned enterprises will lead to increase in indirect and contingent liabilities.

"We expect the government's direct debt burden to rise gradually toward 40 percent of GDP by 2018 and closer to 45 percent by the end of the decade", it said.

The move comes as China tries to clean up a toxic brew of unregulated and risky lending that has for years fueled the economy's spectacular growth, although some analysts doubt Beijing's willingness to quit its debt addiction.

Estimates of China's total nongovernment debt have risen from the equivalent of 170 percent of annual economic output in 2007 to 260 percent previous year.

At the same time, Moody's has changed to stable from negative the rating outlooks of 24 out of the 26 GRIs and rated subsidiaries.


China's total outstanding credit surged to 260 percent of GDP by the end of a year ago and the International Monetary Fund has warned that a debt crisis in the country could "imperil global financial stability".

Meanwhile, growth in the world's second largest economy has dropped from 14.2% in 2007 to 6.7% a year ago.

The downgrading of the China's credit rating has anxious the metal investors globally and domestically.

After India, China has now taken on the global credit rating agency Moody's for downgrading its credit ratings.

"Moody's has overlooked the sound economic fundamentals, robust financial regulatory regime, resilient banking sector and strong fiscal position that Hong Kong has", Financial Secretary Paul Chan said in a statement.

The downgrade places China in the same credit rating bracket as Saudi Arabia, Japan and Israel. Moody's had estimated in October that China's "shadow banking" sector - off-balance-sheet lending that evades official risk supervision - totalled $8.5 trillion, or almost 80 percent of GDP.

In 2013, Fitch Ratings downgraded China's debt to A+ (the same as Moody's current rating), while the S&P gives China a slightly higher rating of AA-. But, with an excessive leverage of the financial system, it would be hard for China to keep growth rates above the target of at least 6.5 per cent.



Other News

Trending Now

Trump 'Hopeful' US Can Help Israel, Palestinians Forge Peace
It considers all of Jerusalem its indivisible capital, a status that is not recognised internationally. The leaders are expected to discuss resuming long-stalled Israeli-Palestinian negotiations.

Supreme Court Strikes Blow Against Patent Trolls, Says CCIA
Following the conclusion of the case, which ruled for Kraft , TC Heartland took its appeal all the way to the Supreme Court . In 2015, a report from Unified Patents showed a surge in patent lawsuits was being driven by non-practicing entities (NPEs).

Facing criticism over Saharanpur clashes, Adityanath vows to establish law and order
The fresh violence took place soon after BSP supremo Mayawati's visit to Shabbirpur village. About a dozen police vehicles were set ablaze and 12 policemen were injured on May 9.

Trump Finishes Overseas Trip With Visit To US Troops In Italy
White House economic adviser Gary Cohn says statements issued after summits like the G-7 are always a "give and take". Two of those six leaders are members of the "Five Eyes" intelligence-sharing agreement with the United States.

ICE arrests nearly 190 immigrants in Southern California operation
They also could have been arrested for baseline immigration law violations: crossing the border illegally or overstaying a visa. Among the convictions pinned to the arrests, drug offenses were the most common, with 43 instances.

Instagram adding location and hashtag-based Stories
Any Snapchat user can create their own Story, but now they'll be able to invite their contacts to post to a shared Story as well. Snapchat just announced a new feature, and it tapped three of the most handsome women in the world to spread the word.

Bella Thorne kisses Scott Disick in Cannes
Meanwhile, Disick's ex Kourtney Kardashian is also in Cannes - with her new beau Younes Bendjima , a 23-year-old model. A week ago, Scott and Bella enjoyed a date night at celeb hotspot Catch, and The Peppermint Club in Los Angeles.

TPS Announcement Raises Concerns Among Haitian Community Activists In South Florida
But it's not like the expiration of the amnesty would mean all 50,000 would be rounded up and sent home the next day. Immigration advocates have protested against deportations, saying conditions in Haiti remain too unsafe .

Supreme Court Strikes Down Two Congressional Districts In North Carolina
And while the Supreme Court is correct in overturning efforts to draw districts based upon race , it should go further. Kagan wrote that the court will not "approve a racial gerrymander whose necessity is supported by no evidence".

Palestinians, Israel police clash at Jerusalem Old City gate
The announcement comes just days after Netanyahu personally greeted US President Donald Trump on his first visit to Israel. "King Salman of Saudi Arabia could not have been kinder, and I will tell you, he's a very wise, wise man", he said.