Moody’s on Thursday( Sep 14 ) lowered the outlook for China, which has been hit by the financial crisis, from stable to negative, citing issues with economic growth that the ratings agency claimed would reduce sales despite government support.
According to Moody’s, contracted sales in China were expected to decline by around 5 % over the following six to twelve months, and the effects of government initiatives to increase home purchases were likely to be inconsistent and short-lived.
The prospect drop coincides with a string of cash-strapped developers’ debt defaults. The most indebted real estate developer in the world, China Evergrande Group, is at the center of the issue.
The largest private property developer in China, Country Garden Holdings, has also been engulfed in the crisis. This week, the company received approval from its creditors to prolong the maturity of a number of inland bonds.
According to Cedric Lai, an analyst at the company, payment tension at Country Garden, which Moody’s rates as Calcium with a bad view, has exacerbated investors’ fear of taking on chance.