Ahead of China credit outlook cut, Moody's asked staff to work from home

Moody's Investors Service advised its employees in China to work from home ahead of its cut to the outlook for the country's sovereign credit rating.

According to a report in the Financial Times (FT), this move was taken following concerns over Beijing's possible reaction.

The move by the US rating agency highlights the troubles faced by foreign companies doing business in China, where some have suffered police raids, exit bans for staff and arrests amid tensions between China and the US and its allies.

The department heads in the agency asked its non-administrative staff in Beijing and Shanghai not to go into the office this week.

A China-based Moody's employee said, "They didn't give us the reason… But everyone knows why. We are afraid of government inspections."

The staff member said that Moody's asked analysts in Hong Kong to temporarily avoid travel to the Chinese mainland ahead of the cut. "Working from home might prevent Chinese authorities from questioning many employees in one place if they decided to raid the agency, but such a raid was still considered to be unlikely," the employee added. 

A spokesperson for Moody's said, "Our commitment to maintaining the confidentiality and integrity of the ratings process is paramount, and therefore, we cannot comment on internal discussions, if any, related to specific credit ratings or issuers."

Earlier, offices of several US-based consultancies were raided by the Chinese authorities, and local employees were detained. 

Michael Hirson, a China analyst at 22V Research in New York, said, "We've seen crackdowns on due diligence companies and other firms, but those have been motivated by issues beyond just negative commentary."

Hirson further said that how authorities handle the situation this time will be a test that the business community and investors will be watching. 

The Chinese authorities criticised Moody's latest rating action. The National Development and Reform Commission, an economic planning body, accused the rating agency of "bias and misunderstanding of China's economic outlook".

According to the FT report, state broadcaster China Central Television dismissed Moody's concerns about a slower growth outlook and soaring government debt on Wednesday, two drivers of the cut in outlook. In a post, the broadcaster said that the Chinese authorities had "always been working on annual projects, looking at five-year plans while thinking about the long term".

It said: "A misjudgement by [Moody's] will not cause too much harm for the Chinese economy. It may cause the company to lose its credibility."