Pro-US S&P cuts down China’s sovereign credit

 Pro-US S&P cuts down China’s sovereign credit (VIDEO - Australian’s economic view of China) (VIDEO - High-speed rail link boost for One Belt One Road (OBOR) initiative)

KUALA LUMPUR (October 2017): For those who follow China’s domestic and global growth closely, S&P Global Ratings has for the first time since 1999 downgraded Beijing’s economic prospects from AA-to A+.

The above two video clips seem to contradict S&P’s rating on China’s economic outlook.

However, reproduced below are two recent news reports to help keep you informed and alert, if you have business or economic interests in mainland China:

"South China Morning Post

S&P pours cold water on Beijing’s upbeat economic narrative

Downgrade, from AA- to A+, is the second by an international rating agency this year

PUBLISHED : Thursday, 21 September, 2017, 5:44pm
UPDATED : Thursday, 21 September, 2017, 11:31pm

S&P Global Ratings on Thursday cut China’s sovereign credit for the first time since 1999, pouring cold water on Beijing’s optimistic reading of its economic prospects.


The US rating agency said the downgrade, from AA- to A+, reflected increased economic and financial risks in China after “a prolonged period of strong credit growth”.

The downgrade was the second by an international rating agency this year, after Moody’s in May cut China’s rating for the first time since 1989. A day after that move, Moody’s also downgraded Hong Kong’s rating.

Also on Thursday, S&P lowered the ratings of three foreign banks that operate in China, namely HSBC China, Hang Seng China and DBS Bank China.

Moody’s cuts China’s credit rating over worsening debt outlook

The downgrades of China’s rating by two agencies in four months suggest Beijing is failing to convince the world of its economic sustainability, despite the rosy economic picture it likes to paint.

The latest downgrade came despite Beijing reporting “stronger-than-expected” growth of 6.9 per cent in the first half of the year, improving the profitability of its indebted industrial sector, engineering a noticeable appreciation in the value of the yuan against the US dollar, and stemming the outflow of capital funds.

Chinese Premier Li Keqiang last week told the heads of six multilateral agencies, including the World Bank and International Monetary Fund, that China’s economy had improved and that its debt situation was “under control”.

China-led multilateral lender AIIB gets top-notch credit rating from Moody’s

S&P said, however, that China’s credit growth in the next two to three years “will remain at levels that will increase financial risks gradually”.

Louis Kuijs, head of Asia Economics at Oxford Economics in Hong Kong, said and it “made sense” for rating agencies to flag risks as they saw them.

The Chinese government’s tolerance of “a continued steady increase in leverage in the coming year – on top of an already high level of leverage – is worrying many people”, he said.

However, he added that China would not be facing a systemic financial crisis any time soon.

A sovereign rating downgrade could make it more costly for Chinese companies and the government to borrow money on the international market, and more difficult for Beijing to attract investors to its financial markets.

China has enough state assets to deal with its debt mountain, official think tank says

When Moody’s downgraded China in May, the finance ministry issued a statement saying the agency had “overestimated China’s economic difficulties and underestimated the capabilities of the Chinese government”. It has yet to respond to Thursday’s downgrade.

Raymond Yeung, chief Greater China economist with ANZ Bank in Hong Kong, said S&P changed its outlook for China last year, which hinted at a future downgrade. Yesterday’s move, therefore, was “well within market expectations and its market impact is limited so far”, he said.

The S&P statement was published a day after the US Federal Reserve set out a timetable to steadily increase interest rates and sell off bonds to reduce its balance sheet, a development that is expected to make it more urgent for Beijing to tackle its domestic debt and financial problems.

Debt-ridden Chinese city does U-turn on scrapping loan guarantees

Outstanding aggregated financing rose by 13.1 per cent at the end of August, according to the People’s Bank of China, despite its claims of adopting a prudent and neutral monetary policy to facilitate financial deleveraging and structural adjustment.

Meanwhile, Chinese researchers said S&P was exaggerating China’s debt risks.

Zhao Xijun, deputy dean of the school of finance at Renmin University of China, said the downgrade was “neither objective, nor accurate or responsible”.

“The key issues regarding China’s credit growth and debt are destination, return and repayment ability,” he said. “China’s investment funds have gone to much needed areas and the likelihood of default is very low.”

‘A yuan should be a yuan’, deputy head of China’s foreign exchange regulator says

Yu Miaojie, deputy head of the National School of Development at Peking University, said China had enough reserves to cover its external liabilities while its domestic debt was not in the danger zone in the context of its economic growth.

“S&P may have over emphasised one or two specific indicators and read a bit too much into them,” he said.

This article appeared in the South China Morning Post print edition as: China receives second cut to credit rating this year

Chinese economy still the ballast for global growth

By Zhang Jingwei, July 5, 2016
[By Zhai Haijun/]

Half of 2016 has passed. How will the global economy develop? The IMF chief Christine Lagarde warned of "new mediocre" risk looming for global growth. The "New mediocre" situation isn't as frightening as the possible "black swans" scenario. The Brexit wasn't a "black swan," nor will Donald Trump becoming the U.S. president, as these risks were already anticipated. For China, a country deeply involved in globalization, the fluctuation in the global market will certainly impact China's economy, although the impacts will be mainly felt in the stock market, foreign exchange market, and trade. Luckily, China's stock market hasn't been fully docked with the global financial market and China is blessed to have enough foreign reserves to ensure the yuan's exchange rate, which means that China is capable of fending off risks from the international market. In addition, China's internal market is big enough.

‘Wrong decision’ in downgrading China’s credit rating, finance ministry says

Agency neglected China’s ‘sound economic fundamentals and development potential’, statement says

PUBLISHED : Friday, 22 September, 2017, 11:12am
UPDATED : Friday, 22 September, 2017, 11:32am

China’s finance ministry on Friday hit back at the decision by S&P Global to downgrade the country’s sovereign credit rating, calling it a “wrong decision”.

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The ratings agency was “neglecting China’s sound economic fundamentals and development potential”, the ministry said in a statement on its website, calling the decision “perplexing”.

“S&P’s focus on credit and debt growth is largely old talk,” the statement said. “It’s a pity that international rating agencies have been misreading the Chinese economy with their old mindsets and experiences gained from developed economies.”

S&P on Thursday downgraded China’s sovereign rating for the first time since 1999, to A+ from AA-, citing increased economic and financial risks after “a prolonged period of credit growth”.

S&P pours cold water on Beijing’s upbeat economic narrative

The downgrade was the second by an international rating agency this year, after Moody’s in May cut China’s rating for the first time since 1989.

“S&P’s downgrading of China’s sovereign credit rating is a wrong decision,” the ministry said.

It responded in a similar way to Moody’s decision in May.

The ministry added that China was able to ensure stability in its financial system.

The prevention of risk and creation of stability in financial markets are key tasks outlined in the National Financial Work Conference in July. - SCMP