Moody's recent massive downgrade of China's sovereign and numerous state-owned units has sparked widespread concern and speculation. Some believe that Moody's is trying to short the Chinese market in preparation for the influx of dollar capital. Recently, however, a Wall Street expert made a shocking point about Moody's true motives. He argues that Moody's is not as ambitious as people think, it is just a money-making institution. So what is Moody's doing this?The answer may lie in China's debt crisis.
Moody's downgrade is aimed at restricting China's overseas debt issuance. For a debt of China's size, it is clearly not a viable option to directly print money. Wall Street financial markets, by contrast, prefer two more common ways of operating: going public with packaged debt and issuing new debt to pay off old debt. First, by packaging the debt for listing, the risk can be diversified and transferred. Second, the issuance of new bonds to repay old debts can effectively alleviate the debt problem and meet market needs.
For China, whether it's a packaged debt listing or a new debt issuance, the key to success is the availability of buyers. At present, many countries issue bonds on a global scale, and U.S. Treasuries are a typical example. If China wants to resolve its huge debt, it is obviously unrealistic to bear it entirely domestically, so issuing bonds to foreign investors has become an inevitable option. However, international credit ratings have a direct impact on bond sales. As a result, Moody's quickly downgraded the ratings of ** and state-owned units, on the one hand, in order to stop China's large-scale bond issuance in the international market and to demand a sum of money from the United States**;On the other hand, for many Chinese organizations, it is also necessary to pay for an excellent rating from Moody's.
What Moody's is doing is called hooliganism, they are essentially double-charging and are not going to do anything noble for the capitalists in the United States.
At present, China's debt scale is already very large, with ** debt exceeding 20 trillion yuan, local ** debt exceeding 30 trillion yuan, and the total of the two has reached 60 trillion yuan. The scale of the debt is so large that it is imperative for China to take steps to resolve it. However, the current approach is conservative and the scale of the issuance is far from sufficient. For the ** debt of 60 trillion, the issuance of only one or two trillion new bonds is obviously just a drop in the bucket. In the U.S. financial community, in 2024, China will issue larger** bonds.
Faced with such a large debt, Moody's smelled an opportunity. Whether it's a packaged debt listing or a new debt issuance, it's important to be able to sell smoothly. As a result, Moody's decided to limit the rating of high-debt** and state-owned units, not only to prevent these units from issuing bonds on a large scale on the international market, but also to collect a fee from the United States**. At the same time, for many Chinese companies, they also need to pay if they want to seek a high rating from Moody's.
In summary, the real intention behind Moody's downgrade is to limit China's overseas debt issuance. They see the business opportunities brought about by China's debt crisis, and by limiting ratings, they can protect their own interests and make a profit for the United States. In the process of resolving its debt, China will inevitably issue bonds to foreign investors, which makes international credit ratings extremely important. Moody's uses its own resources to double-charge in a rogue manner to make huge profits.
Moody's downgrade of China has sparked concern and speculation, with some believing that they are shorting the Chinese market, while a Wall Street expert has offered a different view. Moody's isn't as ambitious as one might think, they're just a money-making agency. There is a deeper intent behind Moody's downgrade, which is to limit the issuance of Chinese overseas debt. For China's huge debt, it is not feasible to directly print money, and it is more common to package the debt and issue new debt to pay off old debt. For China to successfully implement these approaches, it must have enough buyers. However, international credit ratings have a direct impact on bond sales, so Moody's downgraded the rating in order to restrict China's issuance of bonds in the international market and to collect fees from the United States** in doing so. This hooliganism has led Moody's to seek out business opportunities in a number of Chinese entities and to extract double fees from them. Faced with a huge debt crisis, China must find a solution to avoid further difficulties.