Hard to know Moody's mood
A worker at a steel company in Lianyungang, Jiangsu province, in Jan 2015. [Photo/China Daily]
On Wednesday, Moody's Investors Service downgraded China's sovereign credit rating from Aa3 to A1, the first time in nearly 30 years, saying China's financial strength could erode in the coming years as its growth slows and debt continues to rise.
The Chinese government has never cared much about the outlook of rating agencies that use tinted glasses to assess the country's economy, but people should guard against their commercially motivated rating moves and their underlying logic.
Some researchers have even linked a certain rating agency's assessments to the subprime crisis in the United States.
The logic behind Moody's latest move is confusing, because it did not change China's ratings in the 1990s when its economic growth slowed or in the 2000s when its GDP growth was very high. Moody's move, therefore, reveals its prejudice against China.
The majority of the countries that have got Aaa or Aa ratings from Moody's are developed economies, which have seen lower economic growth or have higher debt than China. For example, Moody's has extended a better outlook to some European countries plagued by recession and/or skyrocketing debts, ignoring the fact that compared with the developed economies caught in the "high-income trap", China enjoys a much better economic outlook.
Moody's cited China's likely slower growth and rising debt as the reasons behind its latest move to downgrade the country's credit rating, which again does not hold water.
China's growth rate has been above 6.5 percent in recent years, and the figures for the first quarter of this year promise even stronger growth. Besides, China's debt level has come down as a result of accelerated deleveraging efforts.
By downgrading China's credit rating, not at the time when its growth slowed and debt soared but at a time when its economic growth has stabilized and its debt pressure eased, Moody's is trying to send a signal that it itself cannot understand. Given their irresponsible attitude, rating agencies such as Moody's seem hellbent on committing suicide.