Bad news? China’s credit rating cut because of ‘slowdown in economy.’

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We must realise that China is a huge ‘help’ when it comes to GDP growth. As of not, it’s true even for the U.S economy. The U.S relies a lot on China’s willingness to lend when the U.S needs to borrow. Trade wise, it’s not an awesome thing when your biggest or top 3 trading partner slows down because it would mean that the country would need to work harder to find new trading partners just to replace the slowdown. China’s property market is in trouble, says some analysts. Here’s one: Global property bubble about to pop? Pop means kaboom Well, as long as its economy continues to grow, it should be just fine right? For many developing countries, growing less than 8 percent per year means it’s slowing down. Especially for China because of its potential; population. For now, there is a bad news for China where growth is concerned.

A big piece of news about the world’s second largest economy, China. Moody’s has cut China’s rating from Aa3 to A1. This is the first time it is cut since 1989. (Funny why it has never increased the rating despite all those progress over the years. Yet, one particular nation which has been increasing its debts is always rated higher….) Before everyone starts panicking because of the mumbo-jumbo, this cut means that China is “Rated as upper-medium grade and low credit risk.” It was previously rated Aa3 which stands for “Rated as high quality and very low credit risk.” Malaysia is rated by Moody’s at A3. Same level but two notches lower. This is what it says about Malaysia just a few months back Moody’s on Malaysia:Balance budget 2020 unlikely

After the rating cut, this is the response from China’s finance ministry. It says that Moody’s was exaggerating the mainland’s economic difficulties and underestimating reform efforts. The other two rating agencies have not changed China’s sovereign rating.Standard & Poor’s rating for China currently stands at AA- with a negative outlook, while Fitch’s rating is A+ with a stable outlook. Moody’s says the cut was because of rising economy-wide debt and potential growth slows”.  China’s GDP grew by 6.7 percent in 2016 and this was the slowest since 1990. One article about this can be read here: China can’t sustain its debt binge. 

I think for now, no huge changes. China is trying to rebalance its growth from foreign investments into a more domestically driven one. I think this will take some time but is definitely the right way. Anyway, President Trump from the U.S is doing something similar. He has said it for a long time. At the same time, China is pushing for more integration between all ASIAN nations and I think this One Belt One Road policy will help to drive future growth. Happy following.

written on 24 May2017

Next suggested article:More flights,more connections; China and Malaysia is everything about property related writings and news. Enjoy reading with a latte.

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