Dagong maintains high credit rating for China after Moody’s downgrade

0 Comment(s)Print E-mail CGTN, May 27, 2017
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Good news for China's credit rating: two days after Moody's Investors Services downgraded China’s long-term local and foreign currency issuer ratings, another well-known ratings agency announced Friday that it would maintain its credit rating for China. Dagong Global Credit Rating said it classified the Chinese economy as “stable” based on the country's ongoing structural reforms and prudent monetary policy.

Dagong says in its latest report that it will keep its AA+ rating for China’s long-term local currency and AAA for the country’s long-term foreign currency. Dagong released the result based on its investigation of China's economic performance. Dagong indicates that China's downside economic risks are controllable, debt at all levels of governments is rational and the government’s ability to repay foreign-currency debt is strong.

Dagong points out that China’s structural reforms will help resolve the country's development bottleneck and monetary policy will restrain the capital bubble, keeping the risk of asset quality in the bank system within limits.

The rating agency also addresses in its report that it is convinced of China’s ability to repay foreign-currency debt. That's because of China’s small scale of external debt and huge scale of foreign exchange assets. Beside, China’s surplus of current account is likely to persist, which is a bonus point as well.

Dagong rating executive Tony Tang said earlier that Moody’s rating timing was “suspicious”. He said that was because most people believed China’s worst economic period has already gone and the government has controlled debt in recent years.

Moreover, Bloomberg Asia economist Chen Shiyuan said the slower capital outflows, tightened monetary conditions, and stable stock markets all mean a better economic performance that was ignored by Moody's.

Moody's downgraded China's credit score for the first time in almost three decades from A3 to A1 on Wednesday. Moody's says that was motivated by its concerns about the country's potential rising debt and slowing growth. Moody's said its downgrade reflects its expectations that China's financial strength will erode over the coming years.

China has rejected Moody's decision. The Ministry of Finance said the agency used an inappropriate way to assess the economic risks facing Beijing.

 

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