China says Moody’s downgrade overestimates difficulties facing its economy

Moody’s Investors Service downgraded China’s credit ratings by one notch earlier on Wednesday, saying it expects the financial strength of the world’s second-biggest economy will erode in coming years as growth slows and debt continues to rise.

China’s finance ministry said on Wednesday that a credit downgrade by Moody’s was based on inappropriate methodology, saying it was exaggerating difficulties facing the economy and underestimating reform efforts.

China’s President Xi Jinping. (Reuters photo)

Moody’s Investors Service downgraded China’s credit ratings by one notch earlier on Wednesday, saying it expects the financial strength of the world’s second-biggest economy will erode in coming years as growth slows and debt continues to rise.

The ministry said China’s government debt will rise at a reasonable pace and rising debt levels from local government financing vehicles and state-owned enterprises (SOEs) will not add to existing government debt.