Beijing-based Dagong Global Credit Rating Co on Friday announced its decision to maintain its local and foreign currency sovereign credit ratings of China at AA+ and AAA respectively, both with stable outlook, according to a document the company sent to the Global Times on Friday. Dagong said its judgement is based on that China is "steadily moving forward with structural reform which reduces any downside risks to the country's economic outlook."It also stressed that with China's prudent and neutral monetary policy, the banking sector's risk of asset quality is under control, and asset bubbles will be contained, making the credit environment stable. According to the company, China's economy will maintain a relatively strong momentum in the medium to long term. "China's efforts in pushing ahead the 'Belt and Road' initiative as well as the 'Public Entrepreneurship and Massive Innovation' will also broaden and deepen existing economic development areas," the statement noted. In contrast with Dagong, the US-based credit rating agency Moody's is much more pessimistic about China's economic outlook. On Wednesday, Moody's Investors Service downgraded China's long-term local currency and foreign currency issuer ratings one notch to A1 from Aa3 and changed its outlook from negative to stable, mainly out of concern that the Chinese government's use of fiscal measures to spur economic growth would lead to a rise in government debt. The company also forecast that China's growth will slow to 5 percent in five years.The Guardian cited an anonymous official from Moody's on Friday as saying that they may further cut their rating for China in the future, meaning that China may lose its current A1 rating, if its growing debt problem exceeds Moody's expectations. People's Daily reported on Friday that the fact that certain economic indicators slowed in April has led to worries that China cannot sustain its stable and improving economic trend, but in fact the domestic economy has
shown many positive changes, including better economic structure and stronger momentum, and there are more drivers that can help the domestic economy grow at a medium to high speed. Different standardsXi Junyang, a finance professor at the Shanghai University of Finance and Economics, told the Global Times that overseas rating agencies like Moody's are too reliant on economic indicators and that "domestic and overseas agencies are rooted in different worlds." "Certain domestic economic figures, like the foreign currency reserves, might have edged down in 2016, which prompted Moody's to jump to the conclusion that China's economic problems are serious," Xi said. He said that what Moody's hasn't taken into consideration is the strength of the Chinese government to mobilize capital and influence domestic companies. "But domestic rating agencies like Dagong have a more thorough understanding of the strength of the 'national credit,'" Xi said. Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Friday that overseas rating agencies tend to make comparisons between China and developed Western countries when deciding the rating, and it is not a scientific method. "China's foundation is not the same as [that of] those countries. It can bear more risks, including the risks from mounting debts, for reasons such as China's big foreign currency reserves," he noted.Xi said that Moody's downgrade wouldn't have too much impact on the Chinese economy, as such rating usually is linked to overseas financial activities, but China's financial market is still very much closed to the outside.
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