Moody’s on Thursday reaffirmed its positive rating outlook for the Chinese economy on the back of favourable medium-term growth prospects.
Yesterday, another rating agency Standard and Poor’s had lowered India’s sovereign outlook to negative from stable citing slow fiscal progress and deteriorating economic indicators.
“The outlook for China’s Aa3 foreign and local currency bond ratings is positive, supported by favourable medium-term economic growth prospects, as well as by strong government debt dynamics,” Moody’s Investors Service (MIS) said.
MIS is a wholly-owned credit rating agency subsidiary of Moody’s Corp.
The rating agency also called for tight control over local government finances and a new wave of reform -especially in the financial system - for China to sustain its rapid and stable growth throughout the rest of this decade.
Chinese economy’s large scale provides stability against shocks and offsets institutional weaknesses associated with a relatively low per capita income level, the agency said.
“... Institutional strength is moderate, compared with most other highly rated sovereigns, and transparency is not yet as well developed, yet policies have been effective,” it noted.
On Chinese economy, Moody’s report said that political, economic and financial event risks, “which could prompt an abrupt, multi—notch downgrade, are considered as low and manageable, but not unimaginable“.
China is expected to see a real GDP growth of 7.5 to 8.5 per cent in 2012 and 2013, lower than 10.3 per cent expansion rate seen in the past decade.