Moody's downgrades China's credit rating amid rising debt, potential slowdown in economy

Credit rating agency Moody's downgraded China's credit score on Wednesday over the rising debt faced by the economy and potential slowdown in growth over the coming years.

The agency lowered China's long-term local currency and foreign currency issuer ratings to A1 from Aa3, but said its outlook changed from "negative" to "stable".

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows," the agency said.

The downgrade comes as China has launched efforts to clean up a toxic brew of unregulated and risky lending increasingly viewed as a threat to global financial stability. But analysts have expressed scepticism about Beijing's willingness to quit its debt addiction since freewheeling credit conditions have underpinned the growth China's Communist Party relies on for political legitimacy.

The government has trimmed its 2017 gross domestic product target to around 6.5 per cent.