By Fabiana Negrin Ochoa
Moody's Ratings has upgraded China's credit outlook to stable from negative, citing its economic and fiscal strength to navigate challenges at home and abroad.
"The stabilization of the outlook is supported by sustained growth and effective debt management," the firm said on Monday.
Despite the property-sector slump and an expected slowdown in export growth, Moody's expects exports to continue supporting a relatively strong pace of economic expansion.
Even as outbound shipments cool, Chinese exports' adaptability to shifts in the global trade environment underpins the ratings agency's view that gross domestic product will slow only gradually over the medium term.
It forecasts real GDP growth at 4.5% in 2026 and 4.2% in 2027, giving policymakers enough space to address structural challenges.
Policies prioritizing investment in high-productivity sectors--while managing supply imbalances--will improve capital efficiency, Moody's said in a report.
It expects policymakers to manage debt resolution for regional and local governments in a controlled manner, even as general government debt increases to support the economy.
Fiscal pressures will persist and the government's debt burden will increase, but Moody's sees downside risks as contained, with low interest rates and large domestic savings limiting debt-servicing costs.
"China's closed and predominantly state-owned financial system also provides large captive demand for government debt."
This gives authorities flexibility to pursue reforms at a gradual pace, while maintaining financial stability. Moody's expects China's debt to rise to 82.4% in 2027 from 68.5% in 2025, and to exceed 90% by the end of the decade.
It affirms China's long-term local and foreign-currency issuer and senior unsecured ratings at A1.
That said, given the ongoing drag from the property market downturn means a broad-based improvement in consumption remains elusive, leaving growth largely dependent on investment and exports, it said.
Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
04-27-26 0701ET
