S&P Global Ratings downgraded China's long-term sovereign credit rating on Thursday, less than a month ahead of one of the country's most sensitive political gatherings, citing increasing risks from its rapid build-up of debt. Jagdip Cheema reports.
China's economy is growing at well over twice the rate of most major western countries. But ratings agency Standard and Poor's is worried. For the first time in 17 years it's downgraded China's long term sovereign credit rating from AA- to A+. S&P blames the financial risks linked to the country's growing debt. The timing of the decision has surprised some, with the twice-a-decade Communist Party Congress due to take place next month. It sets the country's policies for the next five years. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "Now of course we do have a very important political event in China coming up this autumn and there has been a wealth of commentary really this year that the Chinese authorities could promote growth into the start of that Congress but potentially in 2018 we may see growth slowing particularly as there's more of a clampdown on the buildup of credit." The Chinese economy is showing little sign of slowing down. First half economic growth of 6.9% was much higher than most analyst expectations. And China is aware of its debt problem. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "Now there has been certain actions this year to clamp down on the build-up of credit and in some areas but it's still very strong. Now it very much depends on how the authorities look at this, How they they work to control the amount of debt." Reaction to the downgrade was muted, with Chinese stock markets closed on Thursday and the yuan little changed.