Moody's Downgrades China's Sovereign Credit Rating Outlook from Stable to Negative

Reflecting Lower Medium-Term Economic Growth and Contraction in the Real Estate Sector

On the 5th, international credit rating agency Moody's downgraded China's sovereign credit rating outlook from 'stable' to 'negative.'

Moody's confirmed China's sovereign credit rating at A1, the fifth-highest rating, and stated that it expects China's annual gross domestic product (GDP) growth rate to be 4.0% in 2024 and 2025.

The downgrade in the sovereign credit rating outlook reflects increasing evidence that Chinese authorities will need to provide financial support to heavily indebted local governments and state-owned enterprises. Moody's viewed this as posing broad risks to China's fiscal, economic, and institutional capacity.

Moody's said, "This outlook change reflects structurally and persistently lower medium-term economic growth and a continued contraction in the real estate sector." Moody's expects China's annual economic growth rate to meet the government target of about 5% this year but forecasts a slowdown to an average of 3.8% from 2026 to 2030.

China's Ministry of Finance expressed disappointment over Moody's downgrade of the sovereign credit rating outlook, asserting that the domestic economy will maintain a positive trend and rebound, and that risks in the real estate sector and local governments are controllable.