BEIJING: Moody’s maintained its negative outlook on China on Monday, citing concerns that tensions with major trading partners could have a long-lasting negative impact on its credit profile.
Affirming its A1 rating, which Moody’s lowered to “negative” from “stable” in December 2023, the credit ratings agency said “the drivers of (China’s) negative outlook have changed,” in a shift from concerns about local government debt and the health of state-owned firms.
“These risks have now receded following concerted government policy, and no longer weigh meaningfully on China’s A1 rating,” Moody’s said in a statement.
In April, another agency, Fitch, cut China’s sovereign credit rating by one notch to A, citing rapidly rising debt and deteriorating public finances.
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Investors are watching to see how other ratings agencies and financial institutions gauge the health of the world’s second-largest economy, following U.S. President Donald Trump’s decision to single out China for 145% tariffs last month.
China’s finance ministry in a statement said Moody’s decision to keep the country’s rating and outlook unchanged was “a positive reflection of the prospects for China’s economy”.
Although China and the United States agreed to a tariff truce earlier this month, Moody’s said “uncertainty around future trade restrictions and global trade flows remains”.
“As a baseline, we expect tariffs on Chinese exports to major markets will remain higher than at the beginning of the year,” it added.
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