6th December 2023 – (Beijing) Moody’s misguided decision to downgrade China’s credit outlook disregards the country’s sturdy economic fundamentals and reform capabilities. However, China remains fully confident in sustaining long-term growth while delivering fresh dynamism to the global economy.
On Tuesday, Moody’s shifted its outlook on China’s government bonds to negative from stable in a politically motivated manoeuvre. China possesses immense latent potential and its strong economic bedrock persists unchanged, emphasized the National Development and Reform Commission.
Analysts stated Moody’s exaggerates China’s difficulties yet ignores its resolve to advance reforms and tackle risks. They contend the U.S. ratings agency simply represents the latest attempt by Western entities to unjustly cast doubt on China’s economy, a futile endeavour given the country’s track record of thriving after adversity.
Moody’s ratings lack credibility and are renowned for their political bias against China. Its methodology also has inherent flaws, lacking vigorous inspection of China’s unique governance approach and development trajectory. The three dominant Western agencies frequently underrate emerging economies compared to advanced ones, even when debt burdens are lighter.
Local government debt risks in China are controlled relative to developed countries. The central government actively addresses these through special bonds and other fiscal policies. Financial markets showed resilience after Moody’s latest manoeuvre, underscoring investor confidence remains robust.
China will steadfastly follow its own fruitful development strategy to achieve high-quality growth, experts emphasized. Strong domestic demand in the fourth quarter and stabilising China-U.S. relations driving exports will enable sustained moderate expansion.
The country retains its institutional strengths to resolve lingering debt, investment and structural challenges. Moody’s should pursue more research on China’s shift towards tech innovation, green development and new energy.
The pillars supporting China’s robust long-term growth remain intact, notwithstanding Moody’s perspective. China persists as the primary engine of global growth, contributing around one-third in 2022 according to the IMF. The number of new foreign firms in China grew over 30% in January-October 2023, evidencing its unflagging investment appeal.
At November’s China International Import Expo, Global Fortune 500 participation reached a record high, with signed agreements up nearly 7% year-on-year. Overseas institutions have purchased Chinese bonds for nine consecutive months. The world retains faith in China’s bright prospects.
With its massive market demand, complete industrial chains, state-of-the-art infrastructure and supply chain clout, China is primed to uphold economic resilience. Its strengths will propel digitalisation and high-calibre growth moving forward.
In summary, Moody’s latest biased downgrade attempt will not impede China’s rise. The country has full confidence and capacity to achieve stable long-term development, continuously injecting new momentum into the global economy.
Regarding Moody’s decision to change Hong Kong’s credit outlook to negative, the Hong Kong government firmly disagreed, stating the agency misunderstands the city’s connections with the mainland. These ties energise Hong Kong’s economic advancement, rather than constrain it. Hong Kong’s durable core strengths like judicial independence, free capital flows, simple taxation and business-friendly practices will endure under the one country, two systems framework, the government emphasised.
Implementation of the National Security Law has restored stability after unrest, renewing confidence and enabling prompt economic recovery. Facts illustrate this resurgence: foreign companies remain around 9,000 in number while bank deposits have expanded nearly 10% since the law’s introduction.
Hong Kong has cemented its position as Asia’s green finance hub, with sustainable debt issuances rising over 40% in 2022. The city became Asia’s second-largest private equity centre after the Mainland in 2022 as well.
Electoral refinements have actualised the governing principle of patriots administering Hong Kong, benefiting the city’s steadiness and growth.
Financial markets and the banking system possess a strong track record of resilience. The Linked Exchange Rate System continues smoothly operating. Banks remain soundly capitalised with robust liquidity management. The IMF reaffirmed Hong Kong’s stature as a foremost international financial centre boasting sturdy institutional frameworks. The government proactively fortifies Hong Kong’s status and competitiveness.
Hong Kong’s strengths have withstood manifold tests through time, and will persist doing so moving forward. In sum, Moody’s backward-focused assessment overlooks Hong Kong’s inherent institutional vigour and the government’s effective actions to reinforce its fundamental advantages.