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Just days after slashing its sovereign rating, officials at Moody's ratings agency said China's reforms are not effective enough to keep in check its ballooning debt and another credit rating downgrade may be on the table unless authorities get its rising credit under control.
The ratings agency downgraded the country's sovereign rating by one level to A1, citing its expectation that China's financial strength will gradually weaken in the coming years as growth potential narrows, expansion slows and nationwide debt continues to increase.
China strongly reacted to Moody's rating cut, stating the decision was derived from incorrect methodology that magnified threats to the economy to exaggerated levels and undermined the government's reform initiatives.
In reaction to China's criticism, senior Moody's official Marie Diron said that the ratings agency has lifted its outlook due to the broad reform agenda being pushed through by Chinese authorities to stem risks from swelling debt levels.
However, Moody's believe that the reforms may slump at a rate at which credit is swelling, but China's debt will not dramatically decline and it will not be strong enough to keep the rising debt in check.
