Moody’s Drops China’s Credit Rating as Debt Piles Up

Jon Government

The US government isn’t the only one piling up debt.
We’ve reported on the ticking debt bomb in the US. Apparently, the timer is ticking in China as well. This week, Moody’s downgraded the country’s credit rating from A1 to Aa3, and changed its outlook from stable to negative. It was the first downgrade of China’s credit rating since 1989.
Meanwhile, Chinese investors are buying gold.

Moody’s expects that economy-wide leverage will increase further over the coming years. The planned reform program is likely to slow, but not prevent, the rise in leverage. The importance the authorities attach to maintaining robust growth will result in sustained policy stimulus, given the growing structural impediments to achieving current growth targets. Such stimulus will contribute to rising debt across the economy as a whole.’
According to CNBC, Moody’s estimates the Chinese budget deficit was ‘moderate’ in 2016, coming in at around 3% of GDP. But it expects the government’s debt burden to rise to near 40% of GDP by 2018 and 45% by the end of the decade.

This post was published at Schiffgold on MAY 24, 2017.