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. 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. 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.
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.