Firm 鈥榳rong鈥 on Chinese bond rating
Print Edition
CHINA’S vice finance minister has accused international rating agencies of basing their findings on “ideological influences” and urged them to “treat emerging economies fairly and impartially,” after Moody’s cut its outlook on China’s sovereign bonds.
“The move (by Moody’s) lacks foresight and vision, and practice will prove the decision wrong, as they should not make judgements on China based on Westernized perspectives,” Zhu Guangyao said yesterday.
Moody’s said on Wednesday that it had downgraded China’s sovereign bonds from stable to negative, citing potential weakening in the country’s fiscal strength, the fall in foreign exchange reserves, and uncertainty about policies.
According to official Chinese figures, the country’s fiscal deficit last year accounted for 2.3 percent of its GDP, and many international institutions hold that a country’s deficit should not exceed 3 percent of its GDP.
Finance Minister Lou Jiwei said last month that there is room to expand fiscal policy and predicted an increased budget deficit this year.
Zhu said the 3 percent “warning line” should not be taken as a uniform standard, and it is mainly applicable to European Union members. The line should vary from country to country, based on national conditions, he said.
Zhu said he expects China’s fiscal revenues to go down slightly as a result of tax and fee cuts, adding that the country will deal with possible fiscal imbalances by increasing the deficit moderately on a temporary basis.
From a medium to long-term perspective, however, supply-side structural reform should add driving forces for China’s economy, boosting fiscal revenues, he said.
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