BEIJING—Standard & Poor’s lowered China’s sovereign credit rating, joining a growing chorus of alarm over the nation’s soaring debt levels despite government pledges to fend off financial risks.

In a Thursday statement, S&P Global Ratings said it downgraded China’s rating to A-plus from AA-minus, while changing its outlook to stable from negative. The action brings all the three major credit-rating firms in line in terms of... </s> Image copyright Getty Images

China's credit rating has been downgraded by Standard & Poor's (S&P) because of worries over the rapid build up of debt in the country.

S&P cut China's rating by one notch from AA- to A+, saying its debts had raised "economic and financial risks".

The International Monetary Fund warned in August that China's credit growth was on a "dangerous trajectory".

S&P's move puts its rating for China on a par with the two other major credit rating agencies, Moody's and Fitch.

The downgrade comes a month ahead of the Communist Party Congress, the country's most significant political meeting which takes place only twice a decade and sets economic policy for the coming five years.

This government has a growth target of 6.5% for 2017, although the economy grew at an annual rate of 6.9% in the second quarter of the year.

One engine of growth has been investment in infrastructure and property by corporations and local authorities.

Image copyright Getty Images

S&P said in a statement: "The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China's economic and financial risks."

Claire Dissaux, head of global economics and strategy at Millennium Global Investments in London, told Reuters the debt problem in the country was immense: "China's credit problem is the biggest problem we have ever seen in any country and probably justifies a lower rating."

She also warned that the centralised nature of the regime meant China's exact position might not be clear: "One element that models cannot capture is the strength of institutions, such as transparency of regulation of the banking sector and central bank independence. All that is an argument to say China's rating might still be too good." </s> Standard & Poors lowered its view of China’s creditworthiness, less than a month ahead of the country’s most important and sensitive political gatherings.

S&P downgraded China to A+ from AA-, a one notch change. It also changed its outlook for the country’s credit rating from negative to stable, implying that investors should not expect further downgrades in the near future.

“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks,” S&P said in a statement.

Moody’s Investor Service had downgraded China to a similar rating in May. Fitch downgraded China four years ago.

The Chinese economy expanded at a 6.9 percent rate in the first half of the year, according to official statistics. That was faster than the Chinese government’s growth target and has prompted concerns that China’s debt-fueled expansion may be harder to control than expected. Many outsiders are skeptical that China will act to rein in credit growth at the expense of economic growth.

The downgrade comes at a particularly awkward time for China’s leaders, just weeks ahead of China’s Communist Party Congress. The twice-a-decade event is expected to see changes in key leadership roles and announcements of new policy priorities. </s> Standard & Poor's lowered China's sovereign credit rating, joining a growing chorus of alarm over the nation's soaring debt levels despite government pledges to fend off financial risks.

In a Thursday statement, S&P Global Ratings said it downgraded China's rating to A+ from AA-, while changing its outlook to stable from negative. The action brings all the three major credit-rating firms in line in terms of their views of the creditworthiness of the world's second-largest economy. Fitch Ratings lowered China's rating in 2013, and Moody's Investors Service did so in May.

The downgrade of China's rating, the first such move by S&P since 1999, reflects its assessment that "a prolonged period of strong credit growth has increased China's economic and financial risks."

Market reaction to the move, announced after China's stock markets closed, was muted with little movement in the yuan, which edged down 0.30% against the U.S. dollar in mainland trading, reflecting the dollar's overnight strength following the latest Federal Reserve meeting.

Global investor sentiment toward China had shown signs of improvement in recent weeks. In the credit markets, the cost of default protection on Chinese sovereign debt earlier this month fell to its lowest levels in more than two years, according to data from IHS Markit.

"The timing for the S&P downgrade is a little bit surprising to me," said UBS economist Wang Tao.

Saumya Vaishampayan and Grace Zhu contributed to this article. </s> BEIJING (AP) The Standard & Poor’s rating agency cut China’s credit rating on Thursday, Sept. 21, citing the country’s rising debt load.

S&P’s announcement followed a similar move by Moody’s, another global rating agency, in May to reduce its own outlook on the Chinese government’s ability to repay its debts.

S&P representatives said the change reflected the view that a “prolonged period of strong credit growth has increased China’s economic and financial risks,” and that China was expected to maintain stable economic growth over the next two to three years. </s> Elisabeth is a reporter for Verdict, covering global news, economics and business. You can reach her at elisabeth.perlman@verdict.co.uk

Moody’s, one of the world’s biggest bond credit rating service downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years.

The move comes amid concerns that economic growth in the country will continue to slow in the coming years, while debt levels rise.

Moody’s said it expects the government’s direct debt burden to rise gradually toward 40 percent of GDP by 2018 “and closer to 45 percent by the end of the decade.”

The Chinese economy expanded by 6.7 percent in 2016 compared with 6.9 percent the previous year — the slowest growth since 1990.

China’s finance ministry said Moody’s was exaggerating the country’s economic difficulties as well as its ability to deepen reform and boost demand.

The ministry added that the decision to downgrade China’s credit rating was based on an “inappropriate method”.

However, Julian Evans-Pritchard, China economist at Capital Economics in Singapore, said measures to resolve the debt overhang, including debt-for-equity swaps at state companies, don’t go far enough.

It’s reached the point where the bad debt problem is just so large the government will have to step in to resolve it at some point, and that obviously means at some point a sizeable increase in government debt.

The other two main credit rating agencies — Standard & Poor’s and Fitch — have so far kept their ratings the same.

The former agency’s outlook for China is negative at AA-, and the latter’s outlook is stable at A+.

China’s president Xi Jinping will hope to secure a second five-year term at the Communist Party Congress later this year. </s> The Standard & Poor's rating agency cut China's credit rating Thursday due to its rising debts, highlighting challenges faced by the country’s leaders as they cope with slowing economic growth.

The downgrade added to mounting warnings about the dangers of increasing Chinese debt, which has fueled fears of a banking crisis or a drag on economic growth. Moody's Investors Service cut its rating for China in May.

S&P lowered its rating on China's sovereign debt by one notch from AA- to A+, still among its highest ratings. The agency had given a warning sign of a possible downgrade in March 2016 when it changed China's outlook to negative.

“A prolonged period of strong credit growth has increased China's economic and financial risks,” S&P said in a statement. “Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”

The ratings cut, announced after Chinese financial markets closed for the day, could raise Beijing's borrowing costs slightly, but the more significant impact is on investor sentiment.

Phone calls to the Chinese Finance Ministry were not answered. After the Moody's downgrade in May, the ministry said the agency had used improper methods and misunderstood China's economic difficulties and financial strength.

The country’s leaders have cited reducing financial risk as a priority this year. They have launched initiatives to reduce debts owed by state companies, including by allowing banks to accept stock as repayment on loans. But private-sector analysts say they are moving too slowly.

Beijing relied on repeated infusions of credit to prop up growth after the 2008 global financial crisis.

That helped propel total non-government debt to the equivalent of 257% of annual economic output by the end of last year, according to the Bank for International Settlements. That is unusually high for a developing country and up from 143% in 2008.

Chinese economic growth fell from 14.2% in 2007 to 6.7% last year, though that still was among the world's strongest.

The government is trying to make the economy more productive by giving market forces a bigger role. It is trying to shrink bloated industries such as steel and cement in which supply exceeds demand, which has depressed prices and led to financial losses.

Beijing is trying to steer the economy to slower, more sustainable growth based on domestic consumption instead of investment and exports. But growth has dipped faster than planners wanted, raising the risk of politically dangerous job losses. Beijing has responded by flooding the economy with credit.

Official efforts to rein in debt “could stabilize the trend of financial risk in the medium term,” S&P said. “However, we foresee that credit growth in the next two to three years will remain at levels that will increase financial risks gradually.”

S&P kept its outlook for China stable. It said that reflected expectations the country will “maintain robust economic performance over the next three to four years.”

“We may raise our ratings on China if credit growth slows significantly and is sustained well below the current rates while maintaining real GDP growth at healthy levels,” S&P said. “A downgrade could ensue if we see a higher likelihood that China will ease its efforts to stem growing financial risk and allow credit growth to accelerate to support economic growth.” </s> By The Associated Press

BEIJING (AP) — The Standard & Poor’s rating agency has cut China’s credit rating, citing the country’s rising debt load.

S&P’s announcement Thursday followed a similar move by Moody’s, another global rating agency, in May to reduce its own outlook on the Chinese government’s ability to repay its debts.

S&P said the change reflects its view that a “prolonged period of strong credit growth has increased China’s economic and financial risks.”

The agency said it expects China to maintain stable economic growth over the next two to three years.

Copyright © 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed. </s> China's debt binge has unsettled one of the world's top credit ratings agencies.

Standard & Poor's said Thursday it has downgraded China's rating one notch, warning that "a prolonged period of strong credit growth has increased China's economic and financial risks."

The move is likely to come as an unwelcome irritant for Chinese President Xi Jinping as he tries to project strength and stability ahead of a major meeting of Communist Party leaders next month.

Related: China has a huge debt problem. How bad is it?

Worries about the high levels of debt in the world's second largest economy, particularly among companies, are hardly new. Economists, investors, the International Monetary Fund and even China's central bank chief have been warning about it for years. S&P's announcement adds another high-profile name to the list.

"This won't be news to anyone who has kept half an eye on China over recent years and shouldn't change anyone's thinking," said Mark Williams, chief China economist at Capital Economics. "S&P is playing catch-up."

Chinese authorities have started to crack down on heavy borrowing by companies this year, but S&P says it expects that "credit growth in the next two to three years will remain at levels that will increase financial risks gradually."

The agency cut China's long-term credit rating to A+, its fifth highest level. That brings it into line with the other two major agencies. Moody's lowered China's rating four months ago, and Fitch did it in 2013.

Related: Moody's cuts China debt rating for first time since 1989

The timing of S&P's announcement "is awkward for China's leaders, immediately ahead of next month's Party Congress," Williams said. Beijing responded angrily to Moody's downgrade in May, calling its methodology "inappropriate."

Despite the debt concerns, S&P said it doesn't expect to cut China's rating further anytime soon, predicting the country "will maintain robust economic performance over the next three to four years."
China's credit rating has been downgraded by Standard & Poor's (S&P) because of worries over the rapid build up of debt in the country.