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S&P says downgraded China as credit growth still too fast
China’s attempts to reduce risks from its rapid buildup in debt are not working as quickly as expected and credit growth is still too fast, S&P Global Ratings said on Friday, a day after it downgraded the country’s sovereign credit rating.
BEIJING: China’s attempts to reduce risks from its rapid buildup in debt are not working as quickly as expected and credit growth is still too fast, S&P Global Ratings said on Friday, a day after it downgraded the country’s sovereign credit rating.
While S&P warned in June that a cut may be on the cards, it said it decided to make the call after concluding that China’s “de-risking” drive that started early this year was having less of an impact on credit growth than initially expected.
“Despite the fact that the government has shown greater resolve to implement the deleveraging policy, we continue to see overall credit in the corporate sector to stay at a 9 percent point,” Kim Eng Tan, an S&P senior director of sovereign ratings, said in a conference call to discuss the one-notch downgrade to A+ from AA-.
“We’ve now come to the conclusion that while we do expect some deleveraging in the next few years, this is likely to be much more gradual than we thought could have been the case early this year.”
China’s finance ministry said the downgrade was “a wrong decision” that ignored the economic fundamentals and development potential of the world’s second-largest economy.
“China is able to maintain the stability of its financial systems through cautious lending, improved government supervision and credit risk controls,” it said on its website.
S&P’s move put its rating in line with those of Moody’s and Fitch, though the timing raised eyebrows as it came just weeks ahead of one of the country’s most politically sensitive events, the twice-a-decade Communist Party Congress (CPC).
S&P does not have a set schedule to review China’s credit ratings, Tan said.
“As part of our ongoing surveillance we do meet with the government and have calls with them. All these were done in the past few months,” he told Reuters by phone later on Friday.
But S&P is obliged to make a call “when the data points to one direction or another”, Tan said.
“Unfortunately it comes close to the Congress.”
