Moody’s notes the chips away from China – Les Echos

This is a warning to Beijing. The rating agency Moody’s Investors Service has decided on Wednesday not to touch the A3 rating it assigns to China but, at the same time it changed its opinion on the future evolution of the economy from the country. And brought China’s outlook from “stable” to “negative”, which actually means that unless change could very well be led to lower its rating if, within six months, she perceived a slowdown in reforms needed sustainable growth and sound fiscal management.

“Without serious and effective reforms, the growth of China’s GDP would slow more significantly, a heavy debt impeding business investment and changing demographics are showing increasingly unfavorable. The public debt would increase much more clearly than we currently believe it. “

The weight of direct debt and indirect

the Moody’s decision to change the outlook of its rating is also based on the likely evolution of the stock of indirect public debt: that of public enterprises, local and regional authorities and large public banks such as the Agricultural Bank of China, China Development Bank and Export-Import Bank of China.

a concern shared with other rating agencies. If Moody’s (noting China AA) evaluates the Chinese government debt at 40.6% of GDP at end 2015, Standard & amp; Poor’s estimated last July that the corporate debt already represented 160% of GDP in 2014, twice the level of that of the United States. And already more than 120% in 2013.

For its part Fitch (which assigns A + China) believes that the risks to Chinese banks by accelerating credit growth are worrisome. “The reduction of half a point in the reserve requirement ratio Effective Tuesday and credit record growth in January, might suggest that the authorities change their policy towards a more growth fueled by credit, “Fitch analysts indicate. And warn that increasing the “outstanding debt will only delay, not treat, an expected rise in bad debts”

Changes.: Beijing wants?

the evolution of China’s public finances is not the only concern of Moody’s also points to the recent evolution of foreign exchange reserves of the country, used to defend the yuan. They were down $ 762 billion (702 billion euros) in the space of a year and a half, leading experts of the rating agency to question the aims of the policy by Beijing.

“Interventions in the stock and foreign exchange markets over the past year suggests that the economic and financial stability is also an objective but considerable uncertainties remain on the priorities of the authorities” says Moody’s

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