The Borneo Post (Sabah)

China hits back at S&P’s ‘mistaken’ credit downgrade

-

BEIJING: China lashed out at the decision by Standard & Poor’s to downgrade the country’s credit rating, calling the warning against ballooning debt ‘mistaken’ and based on ‘cliches’ about its economy.

The agency slashed China from AA-minus to A-plus on Thursday, a move that followed a similar decision in May by Moody’s stemming from concerns that the world’s second largest economy is increasing­ly overlevera­ged.

“S&P’s downgrade of China’s sovereign credit rating is a mistaken decision,” the finance ministry said in a statement, adding that the move was ‘perplexing’.

It went on to scold the company for making a decision based on ‘cliches’ about China’s economy.

The rating “ignores the unique characteri­stics of the capital raising structure of China’s financial markets”, it said.

“Most unfortunat­ely, this is inertialth­inkingthat­internatio­nal ratings agencies have held for a long time and is a misreading of China’s economy based on the experience­s of developed countries,” the ministry said.

“This misreading also overlooks the good fundamenta­ls and developmen­t potential of China’s economy.” S&P followed the move yesterday by cutting the topnotch credit rating of Hong Kong citing the city’s close links the the mainland economy.

Debt-fuelled investment in infrastruc­ture and property has underpinne­dChina’srapidgrow­th, 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 fullyear 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 more than a quarter of a century.

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

Despite the downgrades, analysts have said China’s efforts to deal with the explosion in credit growth have been effective.

“In our view, China’s debt situation has actually improved,” ANZ Research said in a note Friday, adding “we do not expect much financial market impact from the ratings action.” 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.

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

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

However, it warned 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&P’s downgrade of China’s sovereign credit rating is a mistaken decision. Finance ministry

 ??  ?? Chinese flags are seen in front of the Great Hall of the People in Beijing. China lashed out at the decision by S&P’s to downgrade the country’s credit rating, calling the warning against ballooning debt ‘mistaken’ and based on ‘cliches’ about its...
Chinese flags are seen in front of the Great Hall of the People in Beijing. China lashed out at the decision by S&P’s to downgrade the country’s credit rating, calling the warning against ballooning debt ‘mistaken’ and based on ‘cliches’ about its...
 ??  ??

Newspapers in English

Newspapers from Malaysia