"Don't Leave Home" Moody's Recommends Remote Work to Chinese Governor, What's Happening?

Moody's Downgrades China's Credit Rating Outlook to 'Negative'
Concerns Over Retaliation Under Anti-Espionage Law Amid Chinese Government Backlash

Global credit rating agency Moody's downgraded China's national credit rating outlook from 'stable' to 'negative,' and it has been reported that before the announcement, the company instructed its employees in China to work from home to avoid retaliation.

"Do not go to the office, avoid business trips" Moody's concerns

Moody's headquarters located in Manhattan, New York, USA
[Photo by Reuters]

Before Moody's downgraded China's credit rating outlook, the Financial Times (FT) reported on the 7th (local time) that Moody's, fearing retaliatory detention and forced investigations by authorities, advised non-management staff at its Beijing and Shanghai branches to "avoid coming to the office as much as possible" and recommended working from home. Moody's also advised analysts at its Hong Kong office to temporarily refrain from business trips to mainland China.

On the 5th, Moody's maintained China's national credit rating at A1, the fifth-highest rating, but lowered the credit rating outlook from 'stable' to 'negative.' This is the first time Moody's has adjusted China's national credit rating outlook in six years since 2017. Additionally, Moody's forecasted China's annual gross domestic product (GDP) growth rate to be 4.0% for both 2024 and 2025.

It appears that Moody's was concerned about retaliation from Chinese authorities before the announcement. An employee working at Moody's China office told FT, "(The company) did not explain the reason for working from home, but everyone is guessing the reason," adding, "(We) are also afraid of forced investigations by the Chinese government."

China strengthens counter-espionage law... "Frequent oppression of foreign companies"

Downtown Beijing, China. [Image source=Reuters Yonhap News]

This year, China has intensified enforcement of its counter-espionage law, increasing pressure on American consulting firms and accounting firms. Foreign companies operating locally have criticized the strengthened counter-espionage law for being broad and ambiguous, which also suppresses normal business activities.

A representative case was the surprise raid on the Beijing office of the American due diligence firm Mintz Group in March. At that time, five Chinese employees were detained, and in July, a fine of $1.5 million (approximately 1.98 billion KRW) was imposed for conducting external-related statistical surveys without approval.

In April, an employee working at the Shanghai office of the American consulting firm Bain & Company was reportedly investigated by Chinese authorities under the counter-espionage law. The Chinese government also accused the consulting firm Cap Vision of "assisting foreign organizations in espionage activities."

Michael Hudson, an analyst at the American consulting firm 22V Research, said, "This year, we have witnessed several instances of Chinese authorities cracking down on foreign companies," adding, "How Chinese authorities handle Moody's this time will influence the behavior of foreign investors."

Chinese authorities immediately react... "Moody's concerns are unnecessary"

Moody's also downgraded Hong Kong's credit rating outlook from 'Stable' to 'Negative' on the 6th.
[Image source=Reuters Yonhap News]

On the 6th, immediately after Moody's announcement, the Chinese Ministry of Foreign Affairs dismissed Moody's concerns about China's economic growth prospects and fiscal sustainability as unnecessary. The National Development and Reform Commission, China's economic planning agency, also criticized Moody's, saying it holds prejudice and misunderstandings about the Chinese economy.

The Ministry of Finance promptly issued a statement saying, "Despite an unstable global economic recovery and weakening momentum, China's macroeconomy has continued to recover steadily this year, with consistent qualitative development," and added, "China's economy will maintain a positive trend and rebound."

In response, a Moody's official told FT, "Some of the criticisms raised by Chinese authorities are valid," adding, "Because of this, fear of increased regulation on companies is growing."

However, despite these concerns, Moody's downgraded the credit rating outlook for Hong Kong and Macau from 'stable' to 'negative' on the 6th, while maintaining the credit rating at Aa3. Moody's explained this reflected "the close political, institutional, economic, and fiscal ties Hong Kong and Macau have with China under the 'one country, two systems' framework."

This content was produced with the assistance of AI translation services.