Well-known Chinese financial news media group Caixin recently reported that Standard and Poor’s (S&P) just announced the decision to downgrade China’s sovereign credit rating from AA- to A+. This is the first time in 18 years that S&P has downgraded China. In May, another world-class ratings organization, Moody’s, also downgraded the rating of China’s currency. S&P explained that concern over China’s debt level was the primary cause of the downgrade. S&P expects sustained growth of loans made outside the standard banking system over the next two to three years, while China’s total debt growth rate will remain higher than its GDP growth. The financial risks in the Chinese economy are still increasing. S&P did acknowledge the success of the recent efforts the Chinese government put in place to control the growth of debt. However, it will take time for the new policies to have a tangible impact. S&P also mentioned that it may increase China’s ratings if the rate of debt growth slows down significantly. All of the international ratings organizations have been monitoring China’s debt level and its financing platforms carefully. They have repeatedly asked the Chinese government to improve the information transparency of local government debts.
Source: Caixin, September 21, 2017