SHANGHAI / BEIJING (Reuters) - Moody's Investors Service downgraded the credit rating of China on Wednesday for the first time in 30 years, said he expects that the financial strength of the economy will decline in the coming years, as growth slows and debt continues to grow.
The downgrade to Aa3 to A1 happened to the extent that the Chinese government was faced with the problems of the financial risks of growth, caused by years of using credit incentives. "The downgrade reflects Moody's expectations regarding the fact that the financial power of China to slow somewhat in the coming years, and the economic debts prodolzhet grow as a potential growth is slowing," - said in a statement the rating agency, which has changed the outlook on China from negative to stable.
Its position Analysts of the agency explained the assumption that in the next few years, China's financial strength will weaken against the background of growing debt, reducing foreign exchange reserves and doubt in the ability of the authorities to conduct the necessary reforms.
While the downgrade is likely to slightly increase the cost of borrowing for the Chinese government and its state-owned enterprises, it remains comfortable with the investment point of view.
The Shanghai Composite Index in China (SSEC) fell more than 1% in early trading, while China's currency in the offshore market has slightly decreased by 0.1% against the US dollar after the publication of this news.
Moody's also said that he expects that the Government's direct debt burden is gradually rise to 40% of GDP by 2018 and close to 45% by the end of the decade.
A growing number of economists believe that China may be needed massive financial aid to banks in the case of growth of "bad loans".
Based on materials WELTRADE
