Moody's Downgrades China

Moody's has downgraded China's long-term local currency and foreign currency issuer ratings by one notch to A1 from Aa3, with the outlook falling from stable to negative.

The downgrade will lead to increased borrowing costs. As such, it is not surprising that China's finance ministry said Moody's was exaggerating the mainland's economic difficulties and underestimating reform efforts.

Moody's said in a statement that the downgrade reflected expectations that China's financial strength would "erode somewhat over the coming years, with the economy-wide debt continuing to rise as potential growth slows".

Ironically, the Chinese economy expanded by 6.7% in 2016 compared with 6.9% the previous year, the slowest growth since 1990. Other countries would kill for that level of growth!