China is one of the countries in Southeast Asia with a booming economy. However, with the turn of events, Moody's Investors Service has downgraded its credit rating.
Moody's Investors Service has slashed China's credit rating in lieu to the nation's unstable economic growth. The country's credit rating was degraded from Aa3 to A1 while changing the perspective from negative to stable at the same time.
China's yuan declined following Moody's Investors Service downgrade resulting to the state currency's feeble 0.07 percent to 6.8850 a dollar since 9:04 am in Shanghai. Subsequently, the Australian dollar dived to 0.31 percent as soon as its largest trading partner was announced, according to Business Times.
The notice turns up as Beijing reinforces its struggle in the previous months to regulate uncertain investments as well as financing practices that could threaten the economy. The country's major banking institute, The People's Bank of China has established interest rates for short-term loans while regulators are curbing on the state's big shadow banking division.
"The erosion in China's credit profile will be gradual and, we expect, eventually contained as reforms deepen. The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong compared to other sovereigns, still considerable scope for policy to adapt to support the economy, and a largely closed capital account," Moody's Investors Service stated on Wednesday.
It was in March of last year that Moody's Investors Service cut down the credit rating of China from stable to negative, Nikkei Asian Review reports. The company perceived a rise in debt, diving currency fund and ambiguity regarding the authorities' capability to invoke reforms.
Due to Moody's Investors Service downgrading on China's credit rating, the Shanghai Composite Index shortly drop below the year low record that was on May 10. Most affected in the business sector include materials and infrastructures, resources, and finance and real estate stocks.