China’s Debt Outlook Downgraded as Economy Slows

The risks from China’s debt pile are mounting as the country grapples with an economic slowdown and property crisis, a leading credit ratings agency has said.

Moody’s issued the warning as it cut its outlook on the government’s debt to negative, from stable.

The firm is the latest to raise concern about problems facing the world’s second-largest economy.

China said it was disappointed by the move, calling the economy resilient.

The country has signalled plans to ramp up stimulus spending, as it battles soaring youth unemployment, weaker global demand hitting its manufacturing industry and deepening woes in the property sector.

Some of the country’s largest construction companies are facing insolvency and have stopped building, leaving customers stranded.

Local governments, which have borrowed billions to build infrastructure and relied on land sales to bring in revenue, are also under strain.

Moody’s said the expected support for the local governments and other state-owned enterprises presented “broad downside risks to China’s fiscal, economic and institutional strength”.

Absorbing even some of the liabilities would be accompanied by “material costs, which would undermine China’s fiscal strength and potentially its creditworthiness”, it said.