S&P’s downgrade of China’s sovereign debt angers Beijing
China’s sovereign credit goes from AA- to A after “a prolonged period of strong credit growth”. The downgrade could make it costlier for Chinese companies and government to borrow money on international markets. China’s Finance Ministry calls it the “wrong decision”.
Beijing (AsiaNews/Agencies) – For the first time since 1999, S&P Global Ratings on Thursday downgraded China’s sovereign credit from AA- to A, reflecting increased economic and financial risks in China after “a prolonged period of strong credit growth”.
Despite Beijing reporting “stronger-than-expected” growth of 6.9 per cent in, the country has rapidly built up debt -- reaching approximately 260 per cent of GDP.
Many economists believe that the Chinese economy is doped by government loans and debt coverage.
S & P's downgrade follows Moody's in May. The rating agency also lowered the ratings of three foreign banks that operate in China, namely HSBC China, Hang Seng China and DBS Bank China.
A sovereign rating downgrade could make it costlier for Chinese companies and the government to borrow money on the international market. It would be also harder for Beijing to attract investors to its financial markets.
China’s Finance Ministry criticised S&P Global ‘s decision to downgrade its sovereign credit rating, calling it a “wrong decision”.
The ratings agency was “neglecting China’s sound economic fundamentals and development potential”, the Ministry said in a statement on its website.
“S&P’s focus on credit and debt growth is largely old talk,” the statement said. For the Ministry, the agency’s vision reflects old clichés about China’s economy.
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