Moodys downgrades China to A1 from AA3

Changes outlook to stable (from negative)

  • Says rating reflects expectations that China's financial strength will erode somewhat over the coming years
  • Says stable outlook reflects assessment that at the A1 rating level risks are balanced
  • GDP will remain very large ; growth will remain high compared to other sovereigns, potential growth is likely to fall in coming years
  • Expects that economy-wide leverage will increase further over the coming years.
  • Expect indirect and contingent liabilities to increase
  • Expect china's growth potential to decline to close to 5% over the next five years
  • Expect the government's direct debt burden to rise gradually towards 40% of gdp by 2018 and closer to 45% by the end of the decade
  • Stable outlook denotes broadly balanced upside and downside risks.
  • China's local currency and foreign currency senior unsecured debt ratings are downgraded to A1 from AA3
  • China's local currency bond and deposit ceilings remain at AA3.

Any boldings above are mine

AUD down on the news:

more to come