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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.

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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>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>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>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>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>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>Debt-fuelled investment has underpinned China's rapid growth. — Reuters picBEIJING, Sept 21 —Standard & Poor’s slashed China’s credit rating today over warnings that its ballooning debt had raised “economic and financial risks”, marking the country’s second downgrade this year.

The decision by S&P, which downgraded China’s debt from AA-minus to A-plus, follows a similar decision in May by Moody’s, which had also raised concerns about the growing debt of the world’s second largest economy.

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

While the credit growth has fuelled China’s economic expansion and high asset prices in recent years, “we believe it has also diminished financial stability to some extent”, the agency said.

Debt-fuelled investment in infrastructure and property has underpinned China’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications.

Beijing has been clamping down on bank lending and property purchases, but those efforts are complicated by the government’s determination to meet its full-year growth target of around 6.5 per cent.

That compares with last year’s pace of 6.7 per cent, which was the slowest in around a quarter of a century.

Premier Li Keqiang said in June that China could meet its target.

“The recent intensification of government efforts to rein in corporate leverage could stabilise 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.”

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

However, Williams said, the downgrade was “arguably questionable on the basis of recent economic and financial development.”

With credit growth now slowing and the latest tightening of liquidity appearing to have peaked, “the immediate risk of some form of credit event is probably lower now than a few quarters ago,” he said.

He noted that the timing was “awkward,” coming just ahead of the country’s important Communist Party congress next month, when President Xi Jinping is expected to be given a second five-year term as head of the party.

When Moody’s downgraded China to A1 in May, it was the first time in almost three decades that the country’s credit rating was cut.

But another major credit ratings agency, Fitch, maintained its A-plus score for China in July, though it warned that the growing debt could trigger “economic and financial shocks”.

China posted better-than-expected second quarter growth as the economy expanded by 6.9 per cent, but analysts have warned that the momentum may not last.

The economy revealed fresh signs of headwinds in August as data showed last week that industrial output and retail sales unexpectedly slowed for a second consecutive month. Fixed asset investment was also well below expectations.

S&P said it “may raise” its rating on China if debt growth slows significantly while the country maintains economic growth at “healthy levels”.

However, it warned that another 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”. — AFP</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>China’s credit rating has been downgraded by Standard & Poor’s amid fears rising debts are adding to economic and financial risks.

The agency lowered China’s sovereign rating by one notch to A+ from AA-, putting it in the same category as countries such as the US and Austria. This is the second downgrade from a major ratings agency for Beijing this year and comes at an awkward time before next month’s Communist party congress.

The Chinese government has been expanding the economy as it pushes to double its size between 2010 and 2020, and has allowed non-financial sector debt to rise rapidly. Total debt has quadrupled since the financial crisis to hit $28tn (£22tn) at the end of last year.

S&P pointed to the “prolonged period of strong credit growth” raising the prospect of economic and financial risks to the country. “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,” it said.

The Chinese government has moved to curb rising levels of debt among domestic companies, restricting firms from investing in foreign media and sport industries after a buying spree around the world.

Chinese firms and wealthy business tycoons have taken control of assets including Legendary Entertainment, the US film producer behind Jurassic World and Warcraft, buildings such as the Cheesegrater in London, and English football clubs including Southampton and Aston Villa.

S&P said the recent government efforts to rein in borrowing by companies could help mitigate financial risks, although it still expects that Chinese corporate debts will continue to grow over the next two to three years at levels that increase financial risks gradually.

However, some analysts said the outlook for China’s economy improved in recent months, amid the government controls and improving corporate earnings. Tao Wang, China chief economist at Swiss bank UBS, said: “We think China’s debt risk has actually declined over the past year. While China’s credit growth continues to outpace nominal GDP growth, the gap has actually narrowed this year.”

The International Monetary Fund has warned of the dangers from China’s credit-fuelled economic strategy, which it warned might risk financial turmoil. It said the country was forecast to expand by 6.7%, although stressed that this was as a result of Beijing pursuing growth targets at the expense of the quality of economic output.

The IMF expects China’s total non-financial sector debt as a proportion of gross domestic product to rise to almost 300% by 2022, up from 242% last year.

S&P said the government was working to cut corruption and to improve governance at state agencies, local governments, and state-owned enterprises. Over time, it said, this could improve the private sector business environment.

Helena Huang, China economist at ICBC Standard Bank, said: “Though without any near-term credit risks amid Beijing’s recent regulatory tightening and deleveraging efforts, the key uncertainty still rests in the longer term on Beijing’s capability to resolve its debt conundrum.”

The downgrade from S&P brings its rating in line with assessments from Fitch and Moody’s, which lowered its rating for the country in May. S&P said it gave China a stable outlook for its credit rating, reflecting a view that the country would maintain its robust economic performance in the next three to four years.</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.