7th December 2023 – (Hong Kong) Moody’s Investors Service advised its staff in China to work from home shortly before a downgrade to the country’s sovereign credit rating outlook, a move believed to be prompted by concerns over potential reactions from Beijing, as per knowledge from two employees familiar with the situation.
Certain department heads within Moody’s in China reportedly instructed associates that non-administrative staff in Beijing and Shanghai were to refrain from attending the office during the week. According to one China-based Moody’s employee, the staff was not explicitly provided with a reason for this decision, but it was widely understood to be due to apprehensions about potential government inspections. There were concerns that the recent rating adjustment may prompt authorities to conduct inquiries.
In addition to this measure, Moody’s also advised analysts in Hong Kong to temporarily avoid travel to the Chinese mainland prior to the downgrade. The agency had recently revised China’s A1 long-term local and foreign-currency issuer rating outlook from stable to negative.
A Moody’s spokesperson stated that the agency’s commitment to maintaining the confidentiality and integrity of the ratings process is paramount, and as a result, they cannot comment on internal discussions related to specific credit ratings or issuers.
In China, several US-based consultancies have faced office raids and detained local employees over what Beijing cited as national security concerns. However, Michael Hirson, a China analyst at 22V Research in New York, expressed doubt that Moody’s rating action would lead to an overt crackdown on the company. Nevertheless, how the authorities handle this situation will be closely watched by investors and the business community.
Moody’s recent rating adjustment has stirred criticism from Chinese officials and social media. The National Development and Reform Commission, an economic planning body, accused the rating agency of bias and misunderstanding of China’s economic outlook. Additionally, a popular WeChat social media account operated by state broadcaster China Central Television dismissed Moody’s concerns about a slower growth outlook and soaring government debt, asserting that a misjudgment by the rating agency would not significantly harm the Chinese economy.