Moody's cuts China credit outlook, citing lower growth, property risks

ironchef · Dec 7, 2023

They are the only ancient empire to survive essentially intact to this day.

With 5000 years of history to guide them, they should be able to survive a Moody downgrade.

gwb-trading · Dec 13, 2023

Remember when the Great recession of 2008 wiped out about $700 billion in value from the US real estate market? Well basically the exact same thing is happening in China right now, except the losses are expected to top $4 TRILLION.

China's banking system is in free fall and the country's real estate losses could hit $4 trillion, veteran investor says
https://finance.yahoo.com/news/chinas-banking-system-free-fall-040910136.html

mervyn · Dec 13, 2023

gwb-trading said:
Remember when the Great recession of 2008 wiped out about $700 billion in value from the US real estate market? Well basically the exact same thing is happening in China right now, except the losses are expected to top $4 TRILLION.

China's banking system is in free fall and the country's real estate losses could hit $4 trillion, veteran investor says
https://finance.yahoo.com/news/chinas-banking-system-free-fall-040910136.html
More...

You are quoting Kyle Bass? What a shock. That guy lost shit load of money betting again HKD, got no credibility when comes to anything China marco.

vanzandt · Dec 13, 2023

gwb-trading said:
Remember when the Great recession of 2008 wiped out about $700 billion in value from the US real estate market? Well basically the exact same thing is happening in China right now, except the losses are expected to top $4 TRILLION.

China's banking system is in free fall and the country's real estate losses could hit $4 trillion, veteran investor says
https://finance.yahoo.com/news/chinas-banking-system-free-fall-040910136.html
More...

He (the "veteran investor") must have read my post from last week.
https://www.elitetrader.com/et/thre...er-growth-property-risks.377298/#post-5899373

murray t turtle · Dec 15, 2023

S2007S said:
Ohhh wowwww another moodys downgrade? This time on China? Uh oh....

Doesn't matter what they say, America is 33 trillion in debt and even with that staggering statistic wallstreet Doesn't care.

Moodys cam downgrade the entire world's credit outlook and it still wouldn't make a difference!!!
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%%
MOISTLY right;
except your last sentence/long term. Better late than never.

gwb-trading · Dec 17, 2023

China’s economy is forecast to slow sharply in 2024, the World Bank says, calling recovery ‘fragile’
https://apnews.com/article/china-economy-property-adb-791934f7f9b83de455e8f8aa7178b628

mervyn · Dec 17, 2023

gwb-trading said:
China’s economy is forecast to slow sharply in 2024, the World Bank says, calling recovery ‘fragile’
https://apnews.com/article/china-economy-property-adb-791934f7f9b83de455e8f8aa7178b628
More...

their gdp is predicated on global demands, so it is not a good news for everyone outside has no money next year.

maxinger · Dec 17, 2023

vanzandt said:
Moody's cuts China credit outlook, citing lower growth, property risks
REUTERS 3:05 AM ET 12/5/2023

(Reuters) - Ratings agency Moody's cut its outlook on China's government credit ratings to negative from stable on Tuesday, in the latest sign of mounting global concern over the impact of surging local government debt and a deepening property crisis on the world's second-largest economy.

The downgrade reflects growing evidence that authorities will have to provide more financial support for debt-laden local governments and state firms, posing broad risks to China's fiscal, economic and institutional strength, Moody's said in a statement.

"The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector," Moody's said.

China's blue-chip stocks slumped to nearly five-year lows on Tuesday amid worries about the country's growth, with talk of a possible cut by Moody's denting sentiment during the session, while Hong Kong stocks extended losses.

China's major state-owned banks, which had been seen supporting the yuan currency all day, stepped up U.S. dollar selling very forcefully after the Moody's statement, one source with knowledge of the matter said. The yuan was little changed by late afternoon.

The cost of insuring China's sovereign debt against a default rose to its highest since mid-November.

"Now the markets are more concerned with the property crisis and weak growth, rather than the immediate sovereign debt risk," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

U.S.-listed shares of Chinese companies fell, with Baidu(BIDU) off 0.5%, Alibaba Group Holding(BABA) down 1.1%, and JD.com(JD) dropping 1.9%.

The move by Moody's was the first change on its China view since it cut its rating by one notch to A1 in 2017, also citing expectations of slowing growth and rising debt.

While Moody's affirmed China's A1 long-term local and foreign-currency issuer ratings on Tuesday -- saying the economy still has a high shock-absorption capacity -- it said it expects the country's annual GDP growth to slow to 4.0% in 2024 and 2025, and to average 3.8% from 2026 to 2030.

Moody's outlook downgrade comes ahead of the annual agenda-setting Central Economic Work Conference, which is expected around mid-December, with government advisers calling for a steady growth target for 2024 and more stimulus.

Analysts say the A1 rating is high enough in investment-grade territory that a downgrade is unlikely to trigger forced selling by global funds. The other two major rating agencies, Fitch and Standard & Poor's, rate China A+, which is equivalent to Moody's. Both have a stable outlook.

China's Finance Ministry said it was disappointed by Moody's decision, adding that the economy will maintain its rebound and positive trend. It also said property and local government risks are controllable.

"Moody's concerns about China's economic growth prospects, fiscal sustainability and other aspects are unnecessary," the ministry said.

STRUGGLING FOR TRACTION

Most analysts believe China's growth is on track to hit the government's target of around 5% this year, but that compares with a COVID-weakened 2022 and activity is highly uneven.

The economy has struggled to mount a strong post-pandemic recovery as the deepening crisis in the housing market, local government debt concerns, slowing global growth and geopolitical tensions have dented momentum.

A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.

"We spent the better part of three years watching China have this sort of off-and-on reopening from the pandemic, and this was the year they finally sort of officially reopened," said Art Hogan, chief market strategist at B Riley Wealth in New York. "But the pace at which the economy has recovered from that has been disappointing."

Analysts widely agree that China's growth is downshifting from breakneck expansion in the past few decades. Many believe Beijing needs to transform its economic model from an over-reliance on debt-fuelled investment to one driven more by consumer demand.

Last week, China's central bank head Pan Gongsheng pledged to keep monetary policy accommodative to support the economy, but also urged structural reforms to reduce a reliance on infrastructure and property for growth.

DEEPER IN DEBT

After years of over-investment, plummeting returns from land sales, and soaring costs to battle COVID, economists say debt-laden municipalities now represent a major risk to the economy.

Local government debt reached 92 trillion yuan ($12.6 trillion), or 76% of China's economic output in 2022, up from 62.2% in 2019, according to the latest data from the International Monetary Fund (IMF).

In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year to help kick-start activity, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.

The central bank has also implemented modest interest rate cuts and pumped more cash into the economy in recent months.

Nevertheless, foreign investors have been sour on China almost all year.

Capital outflows from China rose sharply to $75 billion in September, the biggest monthly figure since 2016, according to Goldman Sachs.
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very outdated/slow.

China A50 index futures has been on the downtrend since Feb 2021, ie almost 3 years ago.

The Moodies must have been sleeping.
How do they work actually ?!!?!