Skip to content
Subscriber Only
Markets
Economics

China Hit by First Moody's Downgrade Since 1989 on Debt Risk

  • Ratings company says outlook now stable as risks are balanced
  • Finance Ministry says Moody’s argument on debt ‘groundless’
Video player cover image

Moody's Investors Service cut its rating on China's debt, saying that the outlook for the country's financial strength will worsen as debt rises and economic growth slows. Moody's Associate Managing Director Sovereign Risk Group Marie Diron speaks on 'Bloomberg Markets.' (Source: Bloomberg)

Updated on

Moody’s Investors Service cut its rating on China’s debt for the first time since 1989, challenging the view that the nation’s leadership will be able to rein in leverage while maintaining the pace of economic growth.

Stocks and the yuan slipped in early trading after Moody’s reduced the rating to A1 from Aa3 on Wednesday, with markets paring losses in the afternoon. Moody’s cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances, while also changing the outlook to stable from negative.