Moody’scuts China credit outlook, warns of lower growth, property crisis

Published

2 years ago

December 8, 2023

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Ratings agencyMoody’sslapped a downgrade warningon China’s credit rating on Tuesday,saying costs to bail out localgovernmentsand state firmsandcontrol itsproperty crisiswould weigh on the world’s No. 2 economy.

The downgrade reflects growing evidence that authorities will have to provide more financial support for debt-laden local governments and state firms, posing broad risks to China’s fiscal, economic and institutional strength,Moody’ssaid in a statement.

Historically, about one-third of issuers have been downgraded within 18 months of the assignment of a negative rating outlook.

“The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said.

China’s blue-chip stocks slumped to nearly five-year lows on Tuesday amid worries about the country’s growth, with talk of a possible cut by Moody’s denting sentiment during the session, while Hong Kong stocks extended losses.

China’s major state-owned banks, which had been seen supporting the yuan currency all day, stepped up US dollar selling very forcefully after the Moody’s statement, one source with knowledge of the matter said.

The yuan was little changed by late afternoon.

The cost of insuring China’s sovereign debt against a default rose to its highest since mid-November.

“Now the markets are more concerned with the property crisis and weak growth, rather than the immediate sovereign debt risk,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

US-listed shares of Chinese companies fell, with Baidu off 0.5%, Alibaba Group Holding down 1.1%, and JD.com Jdropping 1.9%.

The move by Moody’s was the first change on its China view since it cut its rating by one notch to A1 in 2017, also citing expectations of slowing growth and rising debt.

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WhileMoody’saffirmedChina’s A1 long-term local and foreign-currency issuer ratings on Tuesday — saying the economy still has a high shock-absorption capacity — it said it expects the country’s annual GDP growth to slow to 4.0% in 2024 and 2025, and to average 3.8% from 2026 to 2030.

Moody’s main peer, S&P Global, said later in a long-scheduled global outlook call that its big concern was that “spillovers” from any worsening in the property crisis could push China’s gross domestic product growth “below 3%” next year.

Moody’s outlook downgrade comes ahead of the annual agenda-setting Central Economic Work Conference, which is expected around mid-December, with government advisers calling for a steady growth target for 2024 and more stimulus.

Analysts say the A1 rating is high enough in investment-grade territory that a downgrade is unlikely to trigger forced selling by global funds.

S&P and Fitch, the other major global rating agency, both rate China A+, the equivalent of Moody’s A1, and have stable outlooks.

China’s Finance Ministry said it was disappointed by Moody’s decision, adding that the economy will maintain its rebound and positive trend.

It also said property and local government risks are controllable.

“Moody’s concerns about China’s economic growth prospects, fiscal sustainability and other aspects are unnecessary,” the ministry said.

Most analysts believe China’s growth is on track to hit the government’s target of around 5% this year, but that compares with a COVID-weakened 2022 and activity is highly uneven.

The economy has struggled to mount a strong post-pandemic recovery as the deepening crisis in the housing market, local government debt concerns, slowing global growth and geopolitical tensions have dented momentum.

A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.

“We spent the better part of three years watching China have this sort of off-and-on reopening from the pandemic, and this was the year they finally sort of officially reopened,” said Art Hogan, chief market strategist at B Riley Wealth in New York. “But the pace at which the economy has recovered from that has been disappointing.”

Analysts widely agree that China’s growth is downshifting from breakneck expansion in the past few decades.

Many believe Beijing needs to transform its economic model from an over-reliance on debt-fueled investment to one driven more by consumer demand.

Last week, China’s central bank head Pan Gongsheng pledged to keep monetary policy accommodative to support the economy, but also urged structural reforms to reduce a reliance on infrastructure and property for growth.

After years of over-investment, plummeting returns from land sales, and soaring costs to battle COVID, economists say debt-laden municipalities now represent a major risk to the economy.

Local government debt reached 92 trillion yuan ($12.6 trillion), or 76% of China’s economic output in 2022, up from 62.2% in 2019, according to the latest data from the International Monetary Fund.

In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year to help kick-start activity, raising the 2023 budget deficit target to 3.8% of gross domestic product from the original 3%.

The central bank has also implemented modest interest rate cuts and pumped more cash into the economy in recent months.

Nevertheless, foreign investors have been sour on China almost all year.

Capital outflows from China rose sharply to $75 billion in September, the biggest monthly figure since 2016, according to Goldman Sachs.

World

Israel and Syria agree to ceasefire, says US ambassador to Turkey

Published

44 mins ago

July 19, 2025

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Israel and Syria agree to ceasefire, says US ambassador to Turkey

Israel and Syria have agreed to a ceasefire, the US ambassador to Turkey has said.

Several hundred people have reportedly been killed this week in the south of Syria in violence involving local fighters, government authorities and Bedouin tribes.

As the violence escalated in the southern province of Sweida, Israel launched airstrikes, including attacks on Wednesday on the defence ministry in Damascus and a target near the presidential palace.

Israeli Prime Minister Benjamin Netanyahu’s government said it aimed to protect Syrian Druze – part of a small but influential minority that also has followers in Lebanon and Israel.

In a post on X, the US ambassador to Turkey, Tom Barrack, said Israel and Syria had agreed to a ceasefire supported by Turkey, Jordan and others.

“We call upon Druze, Bedouins, and Sunnis to put down their weapons and together with other minorities build a new and united Syrian identity,” Mr Barrack said in a post on X.

The Israeli embassy in Washington and Syrian Consulate in Canada did not immediately comment or respond to requests for comment from the Reuters news agency.

The ceasefire announcement came after the US worked to put an end to the conflict, with secretary of state Marco Rubio saying on Wednesday that steps had been agreed to end a “troubling and horrifying situation”.

After Israel warned it would destroy forces attacking Syrian Druze, Syrian President Ahmed al Sharaa told the minority group in a televised statement on Thursday that “we reject any attempt to drag you into hands of an external party”.

He then claimed Israel has “consistently targeted our stability and created discord among us since the fall of the former regime”.

It comes after the United Nations’ migration agency said earlier on Friday that nearly 80,000 people had been displaced in the region since violence broke out on Sunday.

It also said that essential services, including water and electricity, had collapsed in Sweida, telecommunications systems were widely disrupted, and health facilities in Sweida and Daraa were under severe strain.

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US

Trump sues Wall Street Journal and Rupert Murdoch for $10bn after Epstein letter report

Published

44 mins ago

July 19, 2025

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Trump sues Wall Street Journal and Rupert Murdoch for bn after Epstein letter report

Donald Trump has filed a lawsuit against Rupert Murdoch, two Wall Street Journal reporters and the publication’s owner, News Corp.

The US president has accused the named individuals of defamation, claiming they acted with malicious intent and caused him overwhelming financial and reputational harm.

The lawsuit, which was filed in Miami, seeks at least $10bn (£7.5bn) in damages.

In a post on Truth Social, Mr Trump called the lawsuit “historic legal action” which was filed on behalf of himself and all Americans who he said will “no longer tolerate the abusive wrongdoings of the Fake News Media”.

“I hope Rupert and his ‘friends’ are looking forward to the many hours of depositions and testimonies they will have to provide in this case,” he wrote.

It comes after Mr Trump claimed that a letter he allegedly wrote to paedophile Jeffrey Epstein was “fake” and said he would sue the “ass off” Rupert Murdoch, who owns the Wall Street Journal (WSJ), which first published the story.

The publication had said Mr Trump wrote the letter as part of a collection Epstein’s former girlfriend, Ghislaine Maxwell, planned to give him as a 50th birthday present in 2003.

It claimed the message, allegedly from Mr Trump, featured several lines of typewritten text, concluding with: “May every day be another wonderful secret.”

The text was framed by what appeared to be a hand-drawn outline of a naked woman, the WSJ claimed. The letter is also said to have featured the signature “Donald”.

Mr Trump immediately denied writing the letter when the WSJ report was published on Thursday night.

“The Wall Street Journal printed a FAKE letter, supposedly to Epstein,” he wrote on Truth Social.

“These are not my words, not the way I talk. Also, I don’t draw pictures. I told Rupert Murdoch it was a Scam, that he shouldn’t print this Fake Story. But he did, and now I’m going to sue his ass off, and that of his third rate newspaper.”

Mr Trump ignored questions about Epstein as he signed a cryptocurrency bill at the White House earlier on Friday.

The president’s lawsuit comes as the US government filed a motion to unseal grand jury transcripts related to Epstein, who took his own life while awaiting trial in 2019.

In a Manhattan federal court filing, the Department of Justice said the criminal cases against Epstein and Maxwell are a matter of public interest, justifying the release of associated grand jury transcripts.

Earlier on Friday, Mr Trump said attorney general Pam Bondi had been asked to release the transcripts because of “the ridiculous amount of publicity given to Jeffrey Epstein”.

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The justice department previously said it had around 200 documents relating to Epstein and that the FBI had thousands more.

It is unknown how much of this is grand jury testimony, which is typically kept secret under US law.

The president has faced increased scrutiny over his alleged friendship with Epstein since his administration’s U-turn on the so-called ‘Epstein files’.

Mr Trump pledged to release files on Epstein during his presidential campaign, as his MAGA movement accused the Biden administration of suppressing the extent of Epstein’s paedophilia, predatory behaviour and his so-called “client list” – thought to contain names of the rich and famous who conspired with him in his child sex trafficking operation.

But after a review of the evidence the US government has, the Justice Department recently determined that no “further disclosure would be appropriate or warranted”.

Venezuela releases jailed Americans in prisoner swap

The Trump administration said on Friday that it had negotiated an exchange with Venezuela, resulting in the release of 10 jailed Americans.

US secretary of state Marco Rubio said the prisoners, who had been held in the South American country, were “on their way to freedom”.

In return, 252 Venezuelan migrants being held in El Salvador have been freed, the Venezuelan government said.

They had been held in the notorious maximum security CECOT prison after being deported by the US.

Sports

NASCAR nixes ’26 Chicago race, eyes ’27 return

Published

1 hour ago

July 18, 2025

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NASCAR nixes '26 Chicago race, eyes '27 return

Associated Press

Jul 18, 2025, 06:30 PM ET

CHICAGO — NASCAR is pressing pause on its Chicago Street Race, answering at least one major question about its schedule for next season.

NASCAR raced on a street course in downtown Chicago on the first weekend in July each of the last three years. But it had a three-year contract with the city, leaving the future of the event in question.

Writing to Mayor Brandon Johnson on Friday, race president Julie Giese said the plan is to explore the potential of a new event weekend with his office and other community leaders while also working on a more efficient course build and breakdown.

“Our goal is for the Chicago Street Race to return in 2027 with an event that further enhances the experience for residents and visitors alike, as we work together towards a new potential date, shorter build schedule, and additional tourism draws,” Giese wrote in her letter to Johnson.

Giese said NASCAR is keeping its Chicago Street Race office and plans to continue its community partnerships.

“We deeply value our relationship with the City of Chicago and remain steadfast in our commitment to being a good neighbor and partner,” she said in the letter.

NASCAR is replacing its Chicago stop with a street race in San Diego.

A message was left Friday seeking comment from Johnson’s office.

NASCAR’s Chicago weekend featured Xfinity and Cup Series races on a 12-turn, 2.2-mile course against the backdrop of Lake Michigan and Grant Park – to go along with a festival-like atmosphere with music and entertainment options.

The goal was an event that appealed to both a new audience in one of NASCAR’s most important regions and the most ardent racing fans. NASCAR used to race at Chicagoland Speedway in Joliet, a 45-mile drive from downtown, but it pulled out after the 2019 season.

Johnson’s predecessor, Lori Lightfoot, was in charge when the three-year contract for the downtown weekend was finalized.

It wasn’t exactly a popular move in Chicago. Local businesses and residents were frustrated by the street closures in a heavily trafficked area for tourists in the summer. But organizers shrunk the construction schedule from 43 days in 2023 to 25 this year, winning over some of the race’s critics.

Drivers and their teams had some concerns about the course ahead of the first weekend. But the setup was widely praised by the time the third year rolled around – both the course and the ability to walk to the circuit from their downtown hotel.

Hendrick Motorsports driver Kyle Larson called Chicago “probably my favorite event in NASCAR each year.”

The racing in downtown Chicago has been dominated by Shane van Gisbergen, who won the Xfinity and Cup races this year from the pole. He also won in Chicago in his Cup debut in 2023 and last year’s Xfinity Series race.

“I love the track,” he said after this year’s Cup win. “It’s a cool place to come to. You feel a nice vibe. You feel a good vibe in the mornings walking to the track with the fans. It’s pretty unique like that.”