Moody's recently downgraded the outlook for the Chinese state and some important state-owned entities, a move that caused a huge stir. In this regard, some mainstream interpretations generally believe that Moody's move is to promote the entry of US dollar capital into the Chinese market and create conditions for US dollar interest rate cuts. However, a Wall Street expert has given a sensational explanation that chills the hearts of the people. He believes that Moody's does not have such great ambitions and capabilities, it is just a huge money-making institution. So what is the real purpose of Moody's move?This brings us to the question of how China is prepared to resolve its huge debts.
Expansion: China's debt is already so large that it is impossible to ignore. On the one hand, the debt of *** exceeds 20 trillion, and the local debt exceeds 30 trillion, and the total exceeds 60 trillion. On the other hand, it is clearly not practical to print money directly, so other ways need to be devoured. There are two commonly used methods in the U.S. financial market: one is to package debt and re-list, which is operated by repackaging bonds and diversifying risks;The other is to issue new debts to repay old debts, which has been running in China and has initially achieved certain results and alleviated the local debt crisis. However, for China, which has a large amount of debt, this approach is still not bold enough, and the scale of the issuance is far from enough. As a result, China is expected to issue larger ** bonds in 2024.
Moody's downgrades of China** and state-owned entities are closely related to China's debt resolution. Whether it is packaging debt to be re-listed, or issuing new debt, there needs to be a market to buy. At present, bonds of many countries are issued globally, most notably US Treasury bonds. Since China needs to resolve its huge debt, it may not be realistic to rely solely on the domestic market to cover it, so it will inevitably need to issue bonds to foreign investors. This brings us to the question of international credit. Moody's quickly downgraded China** and state-owned entities, which on the one hand could limit China's large-scale bond issuance in the international market, so that it could charge a fee to the United States**. On the other hand, China has a large number of various types of units, is there any intention to ask Moody's to upgrade the rating?Then you can only pay for it. Therefore, what Moody's is doing is actually carrying out illegal blackmail, collecting money from both ends, and does not think too much of the American capitalists.
Expansion: Rating agencies play a very important role in the financial markets. The rating results not only affect the pricing of bonds and investor confidence, but also have a significant impact on the country's image and market reputation. However, in practice, rating agencies can also be influenced by many factors, including political motivations, market interests, and so on. Therefore, we need to maintain a rational and objective view of the rating results, and we should not blindly follow them, but should have a deep understanding of the reasons and motivations behind them.
Moody's rating behavior has had a huge impact on China, causing concern and concern not only at home, but also volatility in global financial markets. The downgrades of China** and state-owned entities will have a negative impact on debt issuance, credit interest rates, investment risks, etc. First, a downgrade increases the cost of financing debt, making it more difficult and expensive. Second, credit rates are likely to rise, affecting the domestic financing environment and the cost of borrowing for businesses. In addition, investors' risk appetite for China is likely to decline, leading to capital outflows and ***
However, we should not panic too much and dismiss Moody's ratings altogether. As a mature market player, China is well positioned to meet the challenges posed by the downgrade and take steps to stabilize the market. After all, ratings are only the judgment of one institution and cannot represent the whole story. China has a strong economy and a sound financial system that can cope with and solve the existing debt problem. At the same time, when using the rating results for international bond issuance, China can also take some measures to increase its attractiveness, such as improving transparency, strengthening information disclosure, and strengthening supervision. In these ways, China can increase its credibility and attractiveness, and reduce the pressure of downgrading.
Moody's large-scale rating downgrade has attracted widespread attention and interpretation. Moody's purpose is not to short China, but to see the opportunity for China's debt relief. Its rating results have a significant impact on China's debt issuance, credit interest rates, investment risks, etc. But we must not panic excessively, China has the ability to respond to challenges and solve problems. At the same time, China can also take some steps to increase its attractiveness when using the rating results for international bond issuance. Only on the basis of rationality and objectivity can we better cope with the challenges brought about by the downgrade and promote the healthy development of China's financial system.