SHANGHAI — Moody’s Investors Service cut China’s sovereign credit rating for the first time in nearly three decades, citing expectations that the country’s financial strength will deteriorate in the coming years as debt keeps rising and the economy slows. "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," the release said, adding that the stable outlook reflects the assessment of the risks as "balanced" at the A1 rating level. “While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government,” it said. According to the release, the outlook was changed from negative to stable due to the assessment that China’s government will manage to "maintain economic, financial and social stability in the near term" due to the fact that the government controls parts of the economy and financial system. China’s potential gross domestic product growth was likely to slow towards 5 percent in the coming years, but the slowdown is likely to be gradual due to expected fiscal stimulus, it said. Moody’s said it expects the government’s direct debt burden to rise gradually toward 40 percent of GDP by 2018 “and closer to 45 percent by the end of the decade.”

The Chinese economy expanded by 6.7 percent in 2016 compared with 6.9 percent the previous year — the slowest growth since 1990.
Moody's Investors Service downgrades the credit rating of the People's Republic of China from AA3 to A1.