Moody's cuts China's credit rating to "negative" from "stable"

Jessica Morris
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China's economy is economy is transitioning to a “new normal” of lower growth (Source: Getty)

Moody's cut its outlook for China from "stable" to "negative", citing the country's rising debt burden and uncertainty over the government's ability to implement the much needed economic reforms.

The world's second largest economy is transitioning to a “new normal” of lower growth, driven by domestic consumption instead of credit-fuelled investment.

"Without credible and efficient reforms, China's gross domestic product growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavourable," Moody's said in a note today.

"Government debt would increase more sharply than we currently expect."

The credit ratings agency retained China's Aa3 rating, saying its sizeable foreign exchange reserves would act as a cushion while policymakers implement reforms.

However, Moody's warned that it could downgrade China further if it sees a slowing down of reforms needed to achieve sustainable growth.

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