Moody's slashes China's outlook from stable to negative

Moody's rating agency has slashed China's outlook from stable to negative as it cites growing debt piles as a concern that could possibly send the Asian economy into turmoil if more isn't done to prevent it. The rating agency says that the government's reliance on fuelling demand with credit growth as well as the dependency by state owned enterprise to plug seeping holes could haunt them in the future if they aren't careful.

We've seen an outpouring of supportive statements from policymakers particular those involving the matters of the economy in an effort to get reforms back on track after volatility spread an ugly mess throughout the financial system late last year.

Part of government's promises was to overhaul the system whereby their currency is traded more freely however this has been mired with uncertainty as a recent devaluation cause a tremendous wave of doubt rippling through the global economy which was subsequently placed on hold so as to not cause further harm.

The PBOC has resorted to drawing down foreign currency reserves to protect the currency from external pressures that would require it to devalue more than what would be desired pushing authorities into a corner over what decision needs to be made.

I think China will be unable to sustain the rate of drawdown it is currently experiencing in its foreign accounts although there may be a hefty sum on hand it certainly won't last if the situation were to spin out of control, a scenario Moody's sees as possible. China's alignment to global standards in terms of financial markets means that it cannot meddle the way it is use to deeming their efforts worthless if not worrisome.

Hinderance of a financial market by any institution equates to the same outcome, a distortion that skews the picture away from reality that eventually ends up in tatters. Chinese authorities recent effort to bolster confidence in its ability to reform did show signs of integrity however that is not the end of the line of communication with more transparency is needed in relation to the timeframe with which policymakers intend on implementing a change to a more open market platform.

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