Beijing dismissed Moody’s assessment of its economy but after failing to foresee the 2008 crash, the agency now has a point
It is almost three decades since Beijing was last downgraded by the rating agency Moody’s, and during that period China has been transformed. Since 1989, the year of the Tiananmen square massacre, rapid growth has seen huge progress in the fight against poverty. Compounded growth rates of close to – and in some years higher than – 10% have made China the world’s second biggest economy after the US. At the current rate of progress, it will soon be number one. Few envisaged this when Deng Xiaoping began his reform programme in the late 1970s.
All of which might perhaps explain Beijing’s rather tetchy response to downgrade. China is not accustomed to having its economic strategy questioned, as the response from the finance ministry made abundantly clear. The tone was dismissive. Moody’s were over-playing the risks and under-playing the country’s reform efforts. Put simply, the rating agency didn’t know what it was talking about.