On Wednesday, the Chinese Ministry of Finance questioned the methodology on the basis of which Moody’s agency downgraded the country’s credit rating, again stating that the risks related to the state debt are under control.
Moody’s pro-cyclical method is incorrect, said in a statement published on the ministry’s website.
Moody’s Investors Service for the first time in almost 30 years downgraded China’s sovereign credit rating, indicating that in the coming years the country’s financial situation may deteriorate as a result of debt growth and economic slowdown.
The agency’s decision “overstates the assessment of the problems of the Chinese economy and underestimates the ability of the Chinese authorities to deepen the reform of production and to rationally increase the overall demand,” the ministry said.
At the end of last year, China’s national debt was 27.33 trillion yuan (3.97 trillion US dollars), which is 36.7% of the country’s GDP. This is less than the EU limit of 60% of GDP and less than the ratio of debt to GDP in other major economies, the ministry said.
His statement also says that the government has strengthened control over the borrowings of regional authorities and expects that the level of debt will remain about the same as it was at the end of last year.
Moody’s view that the growth of the debt of state companies and regional authorities strengthens the debt burden on the state “reflects the lack of necessary knowledge of Chinese laws,” the ministry said in a statement.