Moody's reaffirms positive rating outlook for China

Yesterday, another rating agency Standard and Poor's had lowered India's sovereign outlook to negative from stable citing slow fiscal progress and deteriorating economic indicators.

"The outlook for China's Aa3 foreign and local currency bond ratings is positive, supported by favourable medium-term economic growth prospects, as well as by strong government debt dynamics," Moody's Investors Service (MIS) said.

MIS is a wholly-owned credit rating agency subsidiary of Moody's Corp.

The rating agency also called for tight control over local government finances and a new wave of reform -- especially in the financial system -- for China to sustain its rapid and stable growth throughout the rest of this decade.

Chinese economy's large scale provides stability against shocks and offsets institutional weaknesses associated with a relatively low per capita income level, the agency said.

"... Institutional strength is moderate, compared with most other highly rated sovereigns, and transparency is not yet as well developed, yet policies have been effective," it noted.

On Chinese economy, Moody's report said that political, economic and financial event risks, "which could prompt an abrupt, multi-notch downgrade, are considered as low and manageable, but not unimaginable".

According to the report, the euro area recession and the after effects of the massive stimulus -- provided in response to the global financial crisis -- are slowing China's growth.

As per Moody's, China is expected to see a real GDP growth of 7.5 to 8.5 per cent in 2012 and 2013, lower than 10.3 per cent expansion rate seen in the past decade.

On the other hand, Moody's Analytics on Wednesday had said that India is growing below its potential as politics is weighing on the economy.

"The single biggest factor weighing on the outlook is the Indian government. In all economies it is impossible to separate the economic from the political outlook, and that is particularly the case in India," it had said.

Moody's Analytics is a subsidiary of Moody's Corp. PTI RAM RAH