New | China doomed to fail as it chases ‘impossible trinity’ of growth, reform and stability: Moody’s

China is bound to fail in at least one of its three conflicting aims to achieve growth, institute reform and maintain stability, says Moody’s as it engages in a war of words with Beijing over the country’s economic prospects.

China’s three policy objectives formed an “impossible trinity”, the ratings agency said in a research report published on Tuesday.

READ MORE: Why stalled reforms are a bigger worry for China’s economy than a hard landing

Beijing could at best achieve only two of those objectives at one time, it said.

The research note – authored by six analysts and led by Michael Taylor, Moody’s managing director and chief credit officer for the Asia-Pacific – was released just hours after China reported a 20 per cent drop in February exports – its biggest fall since 2009 when the country was hit hard by the global financial crisis.

In the face of its “trilemma”, Moody’s said, China was now pursuing growth and stability over reform, as seen from its government work report delivered to the National People’s Congress.

“While the combination of growth and stability might seem to minimise risks in the short run, it is likely to leave unaddressed, in the long run, the deep imbalances evident in China’s economy, thereby increasing the long-term adjustment costs,” the report said.