Moody's downgrade of China's sovereign credit rating is hardly a stir

On December 5, 2023, Moody's Ratings Company released the China Sovereign Credit Rating Report, maintaining China's sovereign credit rating from Aa3, but adjusting the rating outlook from "stable" to "negative". Moody's Rating Company is an internationally renowned credit rating agency. Its sovereign credit rating of various countries is an important indicator reflecting a country's ability and willingness to repay its debts, as well as an important factor affecting international capital flows and investment decisions.

Moody's has downgraded China's sovereign credit rating, citing slowing economic growth, worsening fiscal conditions, uncertainty in the financial system and concerns about future economic developments. Moody's believes that given China's slowing economic growth, the Chinese government may not be able to repay its debts on time and must downgrade China's credit rating.

Obviously, Moody's rating adjustment, this is a negative signal for the Chinese economy, to a certain extent, affecting China's international credibility and market confidence, increasing the financing costs and debt pressure of Chinese enterprises. However, Moody's has always misjudged and prejudiced China's economy, its rating method has some flaws and biases, it has insufficient judgment on the current situation and prospects of China's economy, ignored the determination and ability of the Chinese government to reform, and over-pessimistically predicted China's financial strength and credit risk.

Once the news was released, it immediately caused wide attention and hot discussion at home and abroad. China's finance ministry responded immediately, saying that "Moody's concerns about China's economic growth prospects and fiscal sustainability are unnecessary". Since the beginning of this year, in the face of a complex and grim international situation, and against the backdrop of unsteady global economic recovery and weakening growth momentum, China's macroeconomic recovery has continued and high-quality development has made steady progress. China remains an important engine for the steady growth of the world economy, contributing more than 30 percent to global growth.

Government departments and agencies such as the Ministry of Finance, the People's Bank of China, and the National Development and Reform Commission have also issued responses and views on the Moody's report. They pointed out that Moody's report ignored the resilience and vitality of the Chinese economy, underestimated the Chinese government's governance capacity and policy space, and overestimated the difficulties and risks facing the Chinese economy. They believe that the Chinese economy still maintains a momentum of steady and sound development, and the Chinese government still adheres to the guidance of the new development concept, takes the supply-side structural reform as the main line, focuses on preventing and resolving major risks, promotes high-quality development, and improves the sustainability and resilience of the economy. They said that the Chinese government has the confidence, ability and conditions to maintain the stable operation of the economy, safeguard financial stability and security, and safeguard national sovereignty and credit.

At present, Moody's rating adjustment has not caused significant impact on China's financial market and real economy, and the confidence and expectations of market participants have not been significantly affected. This does not mean that we can turn a blind eye to Moody's rating adjustment or take the problems and challenges of the Chinese economy lightly. At a time when confidence is more important than gold, Moody's rating change is an objective fact of life, and its impact should not be overstated, nor should its significance be overlooked too much. China should treat it with common sense, respond with concrete actions, speak with better results, and move forward with stronger confidence.