US credit rating firm Moody’s Investor Service lowered its outlook for China’s credit rating from stable to negative, citing "rising debt" and "continued depletion of foreign reserves." (Moody's kept the still-decent Aa3 grade on its sovereign debt, however.)
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The move comes on the heels of weak manufacturing data for the new year and the latest G-20 meeting, which focused heavily on China’s ailing economic outlook, the Wall Street Journal reports.
Moody’s says it expects China’s weakening fiscal strength to fall further due to the high amounts of debt taken on by local governments, policy banks and state-owned enterprises.
Chinese debt rose to 40.6% of GDP at the end of 2015, a marked increase from its 32.5% 2012 level. Moody’s expects the ratio to climb to 43% by 2017.
The ratings firm says it will raise China’s rating outlook back to stable if it concludes the government successfully prioritizes economic reforms. [WSJ]
