Moves to downgrade China's credit rating do not indicate imminent trouble for the world's second-largest economy but instead point to the country's "worrisome" long-term direction of travel, global economic analysts have said.
Markets saw an initial sell-off in early Asian trading Wednesday after Moody's Investor Services downgraded China's credit rating one notch to A1 from Aa3, though losses were largely recovered by the close.
"The real question is when do they lose control of managing the interest rates and managing that nip and tuck? In my opinion, because of the managed exchange rate with the rest of the world, it's when the Fed policy starts getting properly tight that China really comes under pressure.
The Chinese government is in the midst of an ambitious reform agenda which it hopes will move the country away from its traditional dependence on manufacturing and towards a services-led economy.
However, with the focus on reigning in lending and maintaining and improving jobs, there is a risk of the government losing sight of another factor which could impede the country's potential for future growth – the environment.
Reference: CNBC
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