A few days ago, Moody's Ratings released the latest sovereign credit rating results for China, maintaining China's A1 rating, but the outlook was adjusted from stable to negative. Industry experts pointed out that the Moody's report has a clear lack of in-depth understanding of China's economic operation, and its conclusions are biased.
The so-called national sovereign credit rating is a judgment of the international rating agency on the credit willingness and credit ability of a country to fulfill its debt repayment obligations as a debtor. "Under normal circumstances, when rating sovereign credit, in addition to considering the growth trend of a country's GDP, external affairs, balance of payments, foreign exchange reserves, total external debt and structure, fiscal revenue and expenditure, policy implementation and other factors, it is also necessary to analyze the financial burden caused by the reform of the financial system, the reform of state-owned enterprises, and the reform of the social security system, and finally draw a comprehensive conclusion. * Feng Qiaobin, deputy director of the macroeconomic research department of the Development Research Center, said.
According to its report, Moody's believes that there are three main factors that affect its outlook for China's sovereign credit: first, the real estate downturn will be a drag on China's medium-term economic growth;Second, the debt of China's financing platform may be converted into a contingent liability, which will affect the country's financial strengthThird, due to changes in population structure and other factors, China's medium-term economic growth may decline.
Feng Qiaobin said that China's economy has shifted from a stage of rapid growth to a more comprehensive and high-quality development that pays more attention to quality, efficiency, and safety, and some deep-seated contradictions have been highlighted in the process of economic transformation. However, as an outside observer, Moody's has a clear lack of in-depth understanding of China's economic operation.
First, there are errors in the judgment of the impact of real estate on the economy. "The judgment of China's real estate trend in the Moody's report is based on the information from 2021 to the release of the report, and due to time constraints, it does not take into account a series of recent support policies for the real estate industry in China. In fact, Standard & Poor's, the same three major rating agencies, made a judgment in its recently released research report that China's real estate has bottomed out. Feng Qiaobin believes that Moody's report also overestimates the dependence of China's finance on land transfer income to a certain extent. The practice of fiscal operation over the years shows that the net income from land in local finance accounts for only 20 percent of the income from land transfer, and the proportion of local fiscal revenue is even lower. According to the Moody's report, "in 2022, land sales accounted for 37 percent of its fiscal revenue," which is clearly too high.
Second, the judgment on the debt of local financing platforms is relatively one-sided. The Moody's report believes that part of the financing platform debt will be converted into ** debt, which in turn will affect the country's fiscal capacity. **Qiao Baoyun, a professor at the University of Finance and Economics, believes that the Moody's report is not accurate on the debt problem of financing platforms. The state includes the debts of financing platforms and some local state-owned enterprises into the management of implicit debts through careful screening, which are mainly debts borrowed by local governments directly or by promising to repay them with financial funds and illegally providing guarantees beyond the statutory debt limit. For those that are not hidden debts, the local ** is not liable. China's path and method of disposing of implicit debts are clear, and there is a clear roadmap for coordinating all kinds of funds, assets, resources and various supporting policies and measures to properly resolve the stock of implicit debts. Overall, China's first-class debt risk is generally controllable. In addition, whenever it comes to debt, the situation on the asset side should be examined at the same time, but the Moody's report does not involve the issue of assets at all, as we all know, under the system dominated by China's public ownership system, it has a large number of asset resources, especially China's large investment in infrastructure construction over the years, and has accumulated a large number of high-quality assets, which should be taken into account when discussing the debt issue.
Third, China's medium-term economic growth rate is low. Moody's gave a low ** for the medium-term growth rate of China's economy, which is significantly lower than that of the International Monetary Organization (IMF), the Organization for Economic Co-operation and Development (OECD), etc. At present, China's economy is in a profound transformation, and the growth rate has declined in recent years due to the impact of the three-year epidemic. However, with the gradual fading of the scarring effect and the easing of geopolitics, China's economy is expected to continue to recover and achieve more stable growth next year. In the long run, the fundamentals of China's long-term economic growth have not changed, and the basic characteristics of strong economic resilience, great potential, wide space and deep market have not changed, which can fully support the long-term stable growth of China's economy. Feng Qiaobin said.
Experts believe that China's economy is on the road of high-quality development, and positive factors in all aspects continue to accumulate, clearly outlining a bright future for economic development. First, the growth of new kinetic energy is accelerated. The production of related production equipment in the fields of chips and artificial intelligence is growing rapidly, and the engine of growth continues to appear. Second, the development of new industries, high-tech and intelligent manufacturing industries is improving. Third, new products such as new energy and new materials are growing rapidly. Fourth, new business formats such as online retail continue to be active. Fifth, the digital economy has become a key force supporting high-quality economic development. Sixth, it is a world leader in green development. China has become the world's largest exporter of new energy vehicles and photovoltaic modules.
Moody's has a certain degree of isolation and cognitive limitations on the profound changes that are taking place in China, and has a limited understanding of China's determination, determination, patience and the advantages of related systems and mechanisms to stabilize economic growth, which to a certain extent affects its research and judgment on China's economic growth prospects and fiscal capacity. We expect Moody's and other institutions to continue to pay attention to the Chinese market and adjust their evaluation conclusions in a timely manner to better guide international investors. Feng Qiaobin said.
Author: Zeng Jinhua).
Editor-in-charge: Wang Shidan |Review: Li Zhen |Supervisor: Wan Junwei.
*: Economy**).