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Experts question Moody's cut for major Chinese tech companies

By Fan Feifei | chinadaily.com.cn | Updated: 2023-12-10 13:53
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A woman is seen at the Tencent Holdings Ltd booth during an expo in Shanghai. [Photo by Fan Jianlei/For chinadaily.com.cn]

The United States-based ratings agency Moody's latest cut on the outlook for major Chinese tech companies is "unfair and inappropriate", and this move neglects the immense growth potential of China's digital economy and platform enterprises, experts said on Saturday.

They said the downgrade of ratings may raise concerns over the professionalism of Moody's, and shows the ratings agency lacks understanding of China's internet and tech sector.

Their comments came as Moody's has adjusted the outlook for 18 Chinese companies, including Alibaba Group Holding Ltd and Tencent Holdings Ltd, from stable to negative after it lowered China's credit ratings and outlook on eight State-owned banks.

Ouyang Rihui, assistant dean of the China Center for Internet Economy Research at the Central University of Finance and Economics, said the Chinese authorities have shown supportive attitudes toward digital economy and platform economy, while Moody's understanding about China's latest policy development is "inadequate".

"The ratings cuts underestimate the significant role domestic tech and internet companies have played in bolstering economic growth of China and even the whole world. The move also downplays these Chinese enterprises' technological innovation capabilities and their innovative business models," Ouyang said.

He said the country's supervision over platform enterprises has become normalized, more transparent and predictable, with more targeted efforts to guide them toward better compliance, promote the healthy development of the sector and better serve the real economy.

The government's policy support is expected to shore up the investment sentiment and market confidence toward the internet and tech industry, he added.

Zhang Xiaorong, head of the research institute of Shenzhen, Guangdong province-based manufacturing company Deep Innovation, said the Moody's outlook downgrade exaggerates the intensified competition among Chinese tech companies and possible challenges they might face in the future, as well as overlooks the huge potential and resilience of China's economy.

The agency failed to take into consideration the country's recent policy support to tech and internet companies, so Moody's rating results are being doubted and have some limitations, and the overall impact on Chinese internet companies is limited, experts added.

Alibaba and Tencent have reported steady growth in both revenues and net profits. Alibaba said its total revenue stood at 224.79 billion yuan ($31.4 billion) during the July-September period, up 9 percent year-on-year, driven chiefly by improved consumer sentiment and increased demand for multiple products.

Tencent reported its revenue rose 10 percent year-on-year to 154.6 billion yuan in the third quarter.

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