China yesterday lashed out at the decision by Standard & Poor’s (S&P) to downgrade the nation’s credit rating, calling the warning against ballooning debt “mistaken” and based on “cliches” about its economy.
The agency on Thursday slashed China from “AA-minus” to “A-plus” on Thursday, a move that followed a similar decision in May by Moody’s stemming from concerns that the world’s second-largest economy is increasingly overleveraged.
“Standard & Poor’s downgrade of China’s sovereign credit rating is a mistaken decision,” the Chinese Ministry of Finance said in a statement, adding that the move was “perplexing.”
Photo: AP
It went on to scold the company for making a decision based on “cliches” about China’s economy.
The rating “ignores the unique characteristics of the capital raising structure of China’s financial markets,” it said.
“Most unfortunately, this is inertial thinking that international ratings agencies have held for a long time and is a misreading of China’s economy based on the experiences of developed countries,” the ministry said.
“This misreading also overlooks the good fundamentals and development potential of China’s economy,” it said.
S&P yesterday followed the move by cutting the top-notch credit rating of Hong Kong, citing the territory’s close links the mainland economy.
Debt-fueled investment in infrastructure and property has underpinned China’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications.
Beijing has been clamping down on bank lending and property purchases, but those efforts are complicated by the government’s determination to meet its full-year growth target of about 6.5 percent.
That compares with last year’s growth rate of 6.7 percent, which was the slowest in more than a quarter of a century.
Despite the downgrades, analysts have said China’s efforts to deal with the explosion in credit growth have been effective.
“In our view, China’s debt situation has actually improved,” ANZ Research said in a note yesterday, adding: “We do not expect much financial market impact from the ratings action.”
When Moody’s downgraded China to “A1” in May, it was the first time in almost three decades that the country’s credit rating was cut.
China reported better-than-expected second-quarter growth as the economy expanded by 6.9 percent, but analysts have said the momentum might not last.
S&P said it “may raise” its rating on China if debt growth slows significantly while the country maintains economic expansion at “healthy levels.”
However, it warned that another downgrade “could ensue if we see a higher likelihood that China will ease its efforts to stem growing financial risk and allow credit growth to accelerate to support economic growth.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)