HONG KONG (AP) – Rating agency Moody’s cut its credit rating for China on Wednesday, citing slowing economic growth and rising debt that it says will erode the country’s financial strength.
Moody’s said that it is downgrading its long-term rating for China one notch to a still robust A1 from Aa3.
The new rating will likely raise borrowing costs, though it is still the fifth highest on Moody’s investment grade scale.
The agency warned that China’s economy-wide debt is expected to rise further over the coming years while the government’s direct debt burden rises to 45 percent of the economy by 2020 from about 40 percent in 2018.
Moody’s said Beijing’s economic reform program won’t suffice to offset the rising debt level, given the authorities’ tendency to use debt-fueled stimulus to spur growth.