Moody’s Downgrades China; ‘You Used Wrong Methodology’, Retorts Beijing 

Moody's, one of the world's big three rating agencies, cut China’s rating by one notch to A1 from Aa3 in its report on Wednesday.

According to a report in BBC, it was the first time the agency has downgraded the country since 1989.

Moody's said that the downgrade revealed expectations that China's economic strength would "erode somewhat over the coming years, with the economy-wide debt continuing to rise as potential growth slows".

In its statement, it pointed out to the decelerating Chinese growth and rising debt levels to keep the economy expanding. It also says that reforms may take a backseat to growth priorities.

However, it is not the first time that international institutions have been alarmed about China's rising debt levels.

But China's finance ministry has responded to the ratings by accusing the rating agency of applying “inappropriate methodology” in downgrading China's credit rating, saying the firm had overestimated the difficulties faced by the Chinese economy and underestimated the country's ability to enhance supply-side reforms.

The other two main credit rating agencies have so far left their evaluations unchanged. Standard & Poor's rating for China currently stands at AA-, while Fitch's rating is A+.