Lightning struck the world’s second largest economy this Tuesday, December 5. Rating agency Moody’s downgraded China’s rating outlook from “stable” to “negative” due to its massive debt burden. And for good reason, China’s sovereign debt increased from $7,107 billion in 2018 to $12,706 in 2022. At this rate, it should explode and exceed the threshold of $20,000 billion by 2027.
The country must in fact bear the burden of community debt, a hidden debt which is around 9,200 billion dollars according to the IMF. “The decision to change the outlook to negative reflects growing evidence that the government and the public sector (…) will provide financial support to regional governments and state-owned enterprises in financial difficulties,” he said. specified the American company, highlighting “vast risks for the budgetary solidity” of the economy.
After two decades of meteoric growth, the country is skating and should also have difficulty achieving its target of 5% in 2023. In the process, Beijing said it was “disappointed” by Moody’s decision.