China’s finance minister downplays credit outlook cut by rating agencies – USA TODAY
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WASHINGTON — China’s finance minister, Lou Jiwei, downplayed Friday the leading credit rating agencies’ recent downgrade of his country’s credit-rating outlook, calling it a “biased” result stemming from a lack of effective communication.
Speaking at a press conference at the International Monetary Fund’s annual meetings here, Lou said the ratings assigned by the credit agencies are “usually lower than the market sentiment.”
In March, Moody’s Investors Service lowered China’s outlook to negative from stable, pointing to rising debt and capital outflows and questioning the government’s capacity to implement reforms to address “imbalances” in the economy.
About a month later, Standard & Poor’s Ratings Services cut its outlook for China’s credit rating. “Economic and financial risks to the Chinese government’s creditworthiness are gradually increasing,” S&P said.
The agencies’ actions were heavily criticized by Chinese officials and media organizations, which pointed to the country’s continued economic growth. China’s gross domestic product (GDP) grew 6.7%, slowing from 6.8% growth in the previous quarter.
“They’re biased in their ratings,” Lou said, urging the credit rating agencies to have “more effective communication” to achieve “comprehensive and objective” assessment.
The agencies highlighted China’s rising debt as a concern as the country seeks to enact measures for spurring economic growth based on domestic demand and less on exports. China’s total debt, including governments, corporate borrowing and households, stands at 282% of its gross domestic product, according to a report last year by the McKinsey Global Institute.
Last month, People’s Bank of China Governor Zhou Xiaochuan also expressed his concern over rising debt levels, saying “lending as a share of GDP, especially corporate lending as a share of GDP, is too high,” according to Bloomberg News.
Lou acknowledged that local government debt levels have risen but said the central government’s debt burden “is not so high.”
In its assessment, Moody’s questioned China “institutional strength” as it pursues reform policies. “China’s institutions are being tested by the challenges stemming from the multiple policy objectives of maintaining economic growth, implementing reform, and mitigating market volatility,” it said. “Fiscal and monetary policy support to achieve the government’s economic growth target of 6.5% may slow planned reforms, including those related to SOEs (state-owned enterprises).”
Lou defended his country’s reform measures, citing “enormous effort” in deregulation policies. “Some effects may not be understood outside,” he said.
Among the measures pursued by the central government include deregulation of agricultural product prices, “breaking barriers” in internal movement of rural citizens moving to cities and encouraging innovation and startups, he said.
China’s finance minister downplays credit outlook cut by rating agencies – USA TODAY}