(Yicai Global) May 24 -- China's Finance Ministry dismissed a decision today by international rating agency Moody's to downgrade China's credit ratings.

The downgrade rested on a "pro-cyclical" rating approach which is "inappropriate," the Ministry of Finance (MOF) said.

Moody's said that it had downgraded China's long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative.

The rating agency based its decision on expectations that China's economy-wide leverage would further rise in coming years, a planned reform program would likely slow, but not prevent the rise in leverage, and sustained policy stimulus would raise debt across the economy.

"These viewpoints, to some extent, overestimate the difficulties facing the Chinese economy and underestimate the capabilities of China to deepen supply-side structural reform and expand overall demand," MOF said.

China's economy got off to a strong start this year. Gross domestic product grew about 7 percent in the first quarter, above the full-year target of 6.5 percent and the 6.8-percent growth in last year’s fourth quarter.

Fiscal revenue jumped almost 12 percent for the first four months, compared to around 9 percent for the same period last year.

MOF cited the strong performance as an effect of ongoing supply-side structural reform.

"China's economy is expected to maintain steady and relatively fast growth thanks to the deepening reforms in state-owned enterprises, finance, taxation and pricing, in addition to the implementation of the Belt and Road Initiative," it said.

The ministry also rebutted Moody's expectation that China's government debt-to-GDP ratio would rise to 40 percent in 2018.

"China's government debt risks are controllable overall, with a debt ratio of 36.7 percent in 2016, well below the 60-percent warning line of the European Union and lower than those of other major developed or emerging economies," MOF said. "Government borrowing will be under strict control against the backdrop of supply-side structural reform. And expected medium-to-high GDP growth in the coming years will also provide fundamental support for reining in local government debt risks."

For China's government debt risks to see major changes in 2018-2020 compared to last year was unlikely, the ministry added.

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