Moody’s Investor Service downgraded China’s credit rating on Wednesday from Aa3 to A1, saying it expects an erosion in the financial strength of the economy in the coming years.
A1 is the fifth highest credit rating, indicating a strong capacity to meet debts, but some susceptibility to adverse changes in circumstances or economic conditions.
Moody’s says the rise of debt in China was a key factor behind the downgrade.
“Rising debt will erode China’s credit metrics, with robust growth increasingly reliant on policy stimulus,” Moody’s said.
“The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,” said the ratings agency.