Moody’s lowers its outlook on 8 Chinese banks to negative

Moody’s lowered its outlook for 8 Chinese banks to negative from stable, after lowering Beijing’s outlook to negative.

The names that were downgraded included the four largest lenders in China, namely Industrial and Commercial Bank of China, Agricultural Bank of China, and China Construction Bank Corporation.

The agency said that changing the outlook to negative was due to a potential decline in the rating or credit quality of the central government, given the change in the sovereign rating outlook.

Moody’s lowered its outlook on the Chinese government’s rating, as it believes that the government’s potential rescue package for struggling local governments and state-backed companies will reduce the country’s economic and institutional strength.

The lowering of China’s outlook reflects concerns related to Beijing’s high level of debt and its repercussions on GDP growth for the country with the second largest economy in the world.

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The report also lowered its outlook for 22 local government financing instruments in China to negative from stable, which is the instrument allocated by local governments to invest in infrastructure projects and social prosperity.

The agency lowered its outlook on Hong Kong’s economy from stable to negative, and attributed this to the tightening of political conditions and financial, economic and institutional ties between China and Hong Kong.

The report continued: The lowering of the outlook came in view of the inherent relationship between the “one country, two systems policy”, as well as the trade relations between the two and the Hong Kong banking system rooted within mainland China.