A protracted downturn in China's real estate sector as well as a broader economic deceleration, but most of all downside risks from China's record debt load which is now well over 300% of GDP... ... has led Moody's Investors Service to downgrade China's sovereign credit rating outlook from stable to negative.
While the revision does not signify Moody's will imminently downgrade China's credit rating, it does increase the odds if persistently lower growth and troubles in the property sector do not diminish.
As the FT reports, the rating agency - which one month ago also lowered its US credit rating to negative - was concerned that government and state firms would provide fresh financial support to weak regions in the country, "Posing broad downside risks to China's fiscal, economic and institutional strength." And they will, because they have no other choice, and the alternative is economic collapse and social upheaval.
There are mounting worries in China's $3 trillion "Shadow banking" sector, primarily because of bad property investments.
" China's Finance Ministry, predictably, called Moody's decision "disappointing": "China's economy is shifting to high-quality development, new drivers of China's economic growth are taking effect, and China has the ability to continue to deepen reforms and respond to risks and challenges," adding that Moody's concerns about the country's growth and fiscal profile are "unnecessary.
China equity indexes, including the CSI 300 Index and Hong Kong's Hang Seng, fell 1.90% and 1.91%, respectively.
Last week, the OECD warned that "structural stresses" in China contributed to downside risk to global growth.
https://www.zerohedge.com/markets/chinas-debt-binge-spurs-moodys-downgrade-credit-outlook
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