Ministry says credit downgrade off target
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E-mail China.org.cn, April 2, 2016
Rating agencies have overstated China's economic difficulties when lowering the outlook on its sovereign credit rating from stable to negative, an official said Friday.
"Standard & Poor's (S&P) and Moody's have overestimated the difficulties China is facing, while underestimating its ability to push forward reforms and cope with risks," said Shi Yaobin, vice-minister of finance, in a formal statement.
S&P on Thursday cut its outlook for the Chinese government's credit rating to negative because it holds that excessive government spending and debt may curb growth. It did, however, maintain the rating at AA-, saying the government's reform agenda was on track albeit at a slower-than-expected pace.
Moody's made a similar decision earlier in March, based on expectations that China's fiscal strength would continue to decline, its forex reserve cuts, and uncertainty about economic reforms.
"Rating agencies need not worry about China's economic restructuring, debt, state-owned enterprise reform and financial market risks. They need in-depth and comprehensive estimation on China's achievements and structural reform development," said Shi in an interview.
With an annual growth rate of 6.9 percent in 2015, China contributed over 25 percent of the world's economic growth last year, the vice minister said.
"As the world's second largest economy and the top trading nation, China has been a growth engine and a stabilizer since the outbreak of the international financial crisis," said Shi.
Shi further promoted the economy's great growth potential, strong resilience and ample leeway, saying that the on-going supply-side reform, among others, will support a medium-high speed of growth.
It is the economic fundamentals instead of the rating that will have the decisive role on the economy and the financial market, said Shi, adding that the trend of China's economy toward growth and expansion has not changed.
This is not the first time that officials have criticized rating agencies. Responding to concerns over Moody's lowering of the outlook, Finance Minister Lou Jiwei said at the recent China Development Forum that he "doesn't care" about the rating because he didn't see negative fallout in any market, international or domestic, as a result.
Friday's statement was toned down from a previous statement on Wednesday in response to Moody's. An unattributed official from the ministry said then that the action was the result of "insufficient knowledge" about China's economy.
"When an economy is in an upward cycle, rating agencies tend to raise their ratings, failing to identify underlying risks in the economy. And when an economy is in a downward cycle, agencies cut the ratings and exacerbate the risks," the official said.
The March Purchasing Managers' Index for the manufacturing sector, released on Friday, was another rebuff to Moody's and the S&P's downbeat assessments.
The index exceeded forecasts and rose to 50.2, its highest since August and the first time in nine months it had entered expansionary territory.
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