Moody’s says of China’s Aa3 rating and stable outlook:
- Underpinned by its macroeconomic strengths and fiscal and external cushions
Moody’s assessment of event risk:
- Views financial risk as the most prominent, owing to the large scale and rapid expansion of China’s financial system
- Notes the outlook on the rated banking system is stable and the risk of a financial system crisis is remote
Notes that while the outlook is ‘stable’, that over time an upward rating pressure could arise, saying that if China receives a growth dividend from the advancement of the reforms outlined by the Third Plenum. However, a negative rating pressure could arise, with the greatest threats arising from
- Tail risks of a sharp slowdown in economic growth, such as precipitated by a disorderly unwinding of systemic leverage,
- a collapse in the property market,
- or a significant deterioration in government finances from a large, material crystallization of contingent liabilities
