Chinese experts push back at Moody's for cutting sovereign bond outlook

By Bloomberg News
 

Chinese experts hit back at Moody’s Investors Service for lowering its outlook on the nation’s sovereign bonds, questioning its understanding of the world’s second-largest economy.
 

Moody’s cut of its outlook to negative was based on old information about the property market, and ignored a recent “slew of supportive policies” said Feng Qiaobin, deputy director of macroeconomic research at the State Council’s Development Research Center. 

“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 added, according to state media. The ratings agency also overestimated the reliance of China’s fiscal budget on income from selling land, she said, according to a report Wednesday in the state-run Economic Daily.

The Chinese government has been critical of Moody’s outlook change since it was announced Tuesday, signaling its displeasure with the decision. The Ministry of Finance said the nation’s economy “will be highly resilient and has large potential,” and that the impact of the property downturn is well under control.

Just afterward, the leading Chinese ratings agency China Chengxin International Credit Rating Co. defended the creditworthiness of the country’s sovereign debt, saying in a statement its outlook for the notes was stable. It emphasized that Beijing “still has ample room to control the rise in debt risks when compared with developed economies such as Europe and the US.”

Qiao Baoyun, a professor with Central University of Finance and Economics in Beijing, also took aim at Moody’s in the same report. Its view on the debt risks that local government financing vehicles face is inaccurate, he said. This was because the government has amassed a large amount of quality assets after years of infrastructure investment, which should be taken into consideration, Qiao said.

Chinese state media outlets are also painting an optimistic picture for domestic stocks in 2024. The Securities Times said in a report citing analysts that equities will experience a “mild bull market” as government policies help the economy. 

On Wednesday, the People’s Bank of China ramped up its support for the yuan via the daily fixing. The gap between the daily reference rate and the average estimate in a Bloomberg survey of analysts and traders was the largest in more than two weeks, a sign that Beijing is boosting its efforts to prevent declines in the currency.

The yuan fell 0.13% to 7.1574 per dollar as of 10 a.m. in Shanghai.