Moody's Affirms China's A1 Rating#
On Monday, Moody's Ratings confirmed China's A1 long-term ratings for both local and foreign currencies. The agency also upgraded its outlook from negative to stable.
Economic Resilience Amid Challenges#
Moody's believes that China's economic and fiscal strength will remain robust despite facing ongoing domestic, trade, and geopolitical challenges. The agency projects that China's real Gross Domestic Product (GDP) growth will be 4.5% in 2026 and 4.2% in 2027. This growth is supported by China's competitive exports and its ability to adapt to changes in the global trade environment, suggesting that GDP growth will only slow gradually in the medium term.
Government Policies and Debt Management#
The rating agency highlighted that government policies focusing on investments in high-productivity sectors will enhance capital efficiency. Moody's anticipates that policymakers will handle the increasing debt of regional and local governments in a controlled manner, even as overall government debt rises.
Future Debt Projections#
Moody's projects that China's government debt will increase from 68.5% of GDP in 2025 to 82.4% in 2027, potentially exceeding 90% by the end of the decade. This increase is attributed to ongoing fiscal support for the economy, including debt swaps for local governments to stabilize their liquidity risks. However, low interest rates, supported by substantial domestic savings, are expected to keep debt servicing costs manageable.
Conclusion#
China's local and foreign currency country ceilings remain unchanged at Aaa and Aa1, respectively. Moody's assessment reflects China's large, diverse economy and its capacity for innovation, which helps counterbalance the pressures from an aging population.