Workers stand on the roof of an elevator at the construction site of a new financial district in Beijing, China May 23, 2017. REUTERS/Thomas Peter
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Moody's Investors Service downgraded China's credit ratings Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise. The one-notch downgrade in long-term local and foreign currency issuer ratings, to A1 from Aa3, comes as the Chinese government grapples with the challenges of rising financial risks stemming from years of credit-fueled stimulus.China's Finance Ministry said the downgrade, Moody's first for the country since 1989, overestimated risks to the economy and was based on "inappropriate methodology".At the same time, Beijing's need to deliver on official growth targets is likely to make the economy increasingly reliant on stimulus, Moody's said.In March 2016, Moody's cut its outlook on China's ratings to negative from stable, citing rising debt and uncertainty about authorities' ability to carry out reforms.China's potential economic growth was likely to slow toward 5 percent in coming years, but the cooldown is likely to be gradual due to further doses of fiscal stimulus, Moody's said.Ratings for state-owned Bank of China, China Construction Bank and Industrial and Commercial Bank of China were affirmed at A1, with Moody's citing their very high level of government support.
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