Moody’s rates China Aa3 with a positive outlook. China’s economy expanded 8.1 percent in the first quarter from a year earlier, the slowest pace of expansion since 2009.
First quarter growth “would mark the bottom if there were not continued weaknesses in Europe. A big element of the slowdown is, one, the slack demand from Europe on China’s exports, and, two, the policy-induced slowdown with the monetary-policy tightening and also the credit tightening that occurred after the post-global financial crisis surge in credit.
‘‘If China can improve its accountability, particularly in local government, then probably a slower growth rate won’t destabilize the country.
‘‘If China continues on a very favorable growth and fiscal trajectory then that should be reflected in a higher rating.’’
‘‘Macroeconomic stability would be credit-positive; inflation has come down from last year’s peak of 6 percent or so, and now it’s under 4 percent, so these developments still support the positive outlook.
‘‘High inflation would have more immediate negative consequences than this gradual rise in unemployment from the grinding down of the growth rate.’’
On political unrest:
‘‘We don’t think the greater social unrest has had a negative impact on government fiscal performance or economic growth, or adverse consequences on the budget where the government has to hand out more public sector increases like they did in some Middle Eastern countries recently. Political unrest that feeds into economic or financial consequences would be credit negative.’’
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