Moody’s rating agency today downgraded its outlook on ten Chinese insurers to “negative” after doing the same for the country’s debt and for several companies and banks in recent days.
Among the affected firms is China Life, the country’s largest insurer, and some of its subsidiaries.
In a statement, Moody’s reiterated that the decision is due to the downgrade of the outlook on sovereign debt on Tuesday in the face of possible financial support from the central government to the most indebted regions, the economic slowdown and the real estate crisis.
The agency said this week that it sees “increasing evidence” that Beijing will give “financial support” to local and regional governments facing problems in their accounts, which “will pose risks to China’s fiscal, economic and institutional strength,” with dangers also in a possible “structural and persistent” slowdown in growth and in the “ongoing reduction” of the weight of the real estate sector on the national economy.
Nevertheless, the firm maintained its A1 rating on China’s debt, considering that Beijing has sufficient financial and institutional resources to “manage this transition in an orderly manner”, and that the large size of its economy also provides a buffer to absorb these risks.
Beijing’s reaction was swift: in a statement, the Ministry of Finance expressed its “disappointment” and assured that the “long-term positive fundamentals” of the development of the Chinese economy have not changed, and that it will continue to be an “important engine” of world growth.
Likewise, Finance described as “controllable” the impact of the real estate crisis on public accounts and affirmed that “the risks” regarding the “hidden debt” that local and regional administrations have accumulated over the last few years are being mitigated.