Ratings agency Moody’s (MCO.NYSE) has raised its rating for China’s sovereign debt from A1 to Aa3, with a positive outlook, state media reported. The upgrade takes China’s debt from "upper-medium grade," subject to low credit risk, to "high quality," subject to very low credit risk. The agency cited China’s strong economic performance and expectations of continued financial strength and stability. Moody’s said that China’s efforts to control inflation were fairly effective policy responses, and that it did not expect inflation to rise significantly. Moody’s highlighted Beijing’s attempt to rein in excess liquidity following massive credit expansion last year. "In particular, we premised our action on the ability of the Chinese authorities to protect systemic stability from the underlying threats arising from the extraordinary credit expansion evident in 2009," said Tom Byrne, senior vice president of Moody’s.
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