Moody’s yesterday upgraded China’s government bond ratings to “Aa3” from “A1” based on the country’s “resilient” economic performance and prospects for continued strong growth.
The international ratings agency said it was maintaining a positive outlook amid expectations that the world’s second-largest economy would remain stable over the medium term.
“The record of the past year demonstrates that China’s policy response to the 2008 crisis has been effective,” Moody’s senior vice president Tom Byrne said in a statement. “In particular, we premised our action on the ability of the Chinese authorities to protect systemic stability from the underlying threats arising from the extraordinary credit expansion evident in 2009.”
Moody’s said China’s 4 trillion-yuan (US$600 billion) stimulus plan unveiled during the crisis had “only modestly affected government finances” and the budget deficit was likely to be contained within 3 percent of GDP this year and next.
Potential losses from a credit surge last year and sharp rises in local government financing are likely to be manageable and China’s large pool of national savings has bolstered the government’s financial strength, it said.
China’s strong external payments position, backed by the world’s largest foreign exchange reserve of US$2.65 trillion as of the end of September, provide a -substantial buffer to global -financial market turbulence, it said.
Beijing’s capital controls will also help stem speculative cash inflows, it added.
The agency forecast China’s economic growth to ease to a more sustainable rate — at around 9 to 10 percent this year, and 8 to 9 percent next year, but external risks to trade relations may be the most threatening over the near term, including tensions with key trading partners over the value of the yuan, it said.
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