Ratings view shrugged off by finance minister

'No major negative response' from international or domestic markets to lowered outlook from Moody's

Finance Minister Lou Jiwei has shrugged off the lowered outlook on China's sovereign credit ratings by US ratings agency Moody's Investors Service earlier this month.

There has been no major negative responses from either the international or domestic markets to the change, he told the China Development Forum in Beijing on March 20.

"We don't care much about the ratings," the minister said.

Moody's cut its credit rating outlook on China and its biggest banks from "stable" to "negative" in early March, citing the country's rising debts and "inadequate capability to carry out reforms".

Lou said he understood Moody's concerns, but said it had failed to take into consideration China's efforts to cut overcapacity and to deleverage.

He said it is unreasonable that the agency has raised the outlook on Greece despite the European country's serious debt problems, while cutting the outlook on China, whose economic situation is much better than that of Greece.

In September, Moody's raised the outlook on Greece's sovereign credit ratings to stable from negative, and in February upgraded the credit ratings of its four key lenders.

Liang Haiming, chief economist of China iValley Research Institute, a think tank in Beijing, says, "Moody's has obviously used double standards."

Analysts say Moody's downgrading of China's rating outlook fails to take into account the country's improving economic fundamentals.

Attending the forum, Vice-Premier Zhang Gaoli said that, judging from first-quarter data, the economy remains resilient, although it does face downward pressure.

He said the main economic indicators have improved since the start of the year, and if this trend continues the Chinese economy will get through its difficulties.

The country's year-on-year GDP growth was 6.9 percent last year, the slowest since 1990. But data from the first two months of this year, such as fixed-asset investment, point to an initial stabilizing in economic activities.

Meanwhile, the economic structure has become more balanced, with consumption and the service sector replacing investment and industry to become the largest contributors to growth.

Political leaders, entrepreneurs and scholars taking part in the forum said the economy will remain sound if it can push forward with its restructuring and reform agenda in the medium and long term.

Dennis Nally, chairman of PricewaterhouseCoopers, says: "If you believed in the potential of China 12 months ago, the fact that it hit some bumps, which I believe are all short term, shouldn't impact your view on the long-term potential of the economy".

Contact the writers through chenyingqun@chinadaily.com.cn

(China Daily European Weekly 03/25/2016 page29)