S&P Lowered China Sovereign Rating

Sep 22, 20171 min read

S&P Global Ratings lowered the long-term and short-term credit rating on China citing strong credit growth concerns.

On September 21 rating updates, the rating agency lowered long-term sovereign credit ratings on China to 'A+' from 'AA-' and the short-term rating to 'A-1' from 'A-1+'. The outlook on the long-term rating is stable. The agency also revised transfer and convertibility risk assessment on China to 'A+' from 'AA-'.

"The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China's economic and financial risks", the rating agency said.

Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, it has also diminished financial stability to some extent, the rating agency says.

S&P said the recent intensification of government efforts to rein in corporate leverage could stabilize the trend of financial risk in the medium term. However, it foresees that credit growth in the next two to three years will remain at levels that will increase financial risks gradually. EndFragmentStartFragment

Consequently, the rating agency also lowered ratings on DBS China, Hang Seng China and HSBC China to 'A+/A-1' from 'AA-/A-1+', citing ratings on the banks are capped by sovereign rating on China. EndFragment