China flays outlook cut by credit-rating agencies

Beijing / AFP

China’s finance minister accused international credit-rating companies of ‘bias’ against the country after Standard & Poor’s Rating Services and Moody’s Investors Service lowered their sovereign outlooks on the world’s second-largest economy.
“Historically, the market performance of most of China’s sovereign debt was higher than the assessment of the credit-rating agencies,” Lou Jiwei said at a press briefing in Washington after a Group of 20 meeting. “That means there’s bias.” Lou was responding to a question from China’s official Xinhua news agency.
The March downgrades didn’t reflect China’s “economic reality,” and the first quarter’s 6.7 percent growth rate was still very high, Lou said. While the pace was slower than last year, it was expected and in line with China’s target range of 6.5 percent to 7 percent, according to Lou. China is also taking measures to control the increase and size of local government debt, a concern cited by Moody’s and Standard & Poor’s, he said.
Lou’s comments were China’s strongest against the credit-rating agencies, after the ministry last month said they underestimated the country’s ability to handle any economic risks. Standard & Poor’s reduced the outlook for China’s AA- long-term credit rating to negative from stable in March, following a similar move by Moody’s earlier in the month.

Increased Support
China’s economic officials have repeatedly tried to calm investors’ concerns over the nation’s outlook and flagged that there’s room to act with increased fiscal and monetary support. Lou previously said in March that the nation’s leaders “didn’t care that much” about the Moody’s cut, because the move had little market impact.
At the same time, the minister said that China’s economy is facing headwinds, mainly from an increasingly aging population. The country is taking on strong measures and reforms to tackle the “downward pressure,” he said.
“I’m afraid the credit rating agencies are not familiar with these reforms, so I don’t blame them,” Lou said, citing a debt-to-equity swap program for which
the government hasn’t released a
detailed plan yet.
Calls made to the Hong Kong offices of Moody’s and Standard & Poor’s weren’t answered outside normal business hours on Saturday.

Credit Surge
China’s economy stabilized last quarter and gathered pace in March as a surge in new credit helped the property sector rebound while raising fresh question marks over the sustainability of the debt-fueled expansion, data showed earlier on Friday.
China’s transformation to a consumer-led economy may be a “rocky” experience, International Monetary Fund First Deputy Managing Director David Lipton said on Bloomberg Television on Friday. While the IMF upgraded its China growth forecasts by 0.2 percentage points for this year and next, it was concerned about the quality of China’s growth.
“The IMF only sees the measures we recently adopted on the demand side, but we have different views on the supply-side reforms,” Minister Lou said. “I don’t want to comment on their forecast. They have their own logic.”