Moody's Investor Service reduced the outlook on 25 non-insurance financial firms and 38 state-owned enterprises to negative from stable, after doing the same to the country’s government.

ANBOUND’s research team is of the view that Moody has sufficient reasons to justify its decision to lower its outlook on China’s sovereign credit rating and some of its state-owned enterprises, and the reasons given by Moody’s reflect many of the problems faced by China.

It is expected that Standard & Poor and Fitch too will follow suit and lower China’s sovereign credit rating, corporate rating and debt rating.

This will not only increase the cost of international financing to be borne by the Chinese enterprises but also is a further blow to the market confidence on Chinese economy, both at home and abroad.