China’s Finance Ministry on Friday criticized the cut in the Standard & Poor’s rating agency’s credit rating on Chinese government borrowing as a “wrong decision.”
The finance ministry said the decision neglects the economic fundamentals and development potentials of the world’s second-largest economy, reports AP.
S&P on Thursday cut China’s long-term sovereign rating 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.
China’s finance ministry said in a statement on Friday the country can maintain appropriate credit growth.
It also said the government’s recent efforts to fend off financial risks will ensure the stability of its financial system and its ability to support China’s real economy.
The Finance Ministry complained S&P ignored China’s stable economic growth and reform efforts. It noted official data showed the economy grew by 6.9 per cent in the first half of 2017 over a year earlier and government revenue rose by nearly 10 per cent.
“The Standard & Poor’s downgrade of China’s sovereign credit rating is a wrong decision,” the ministry said on its website. “This misreading neglects China’s good fundamentals and development potential.”
Total Chinese nongovernment debt rose last year to the equivalent of 257 per cent of annual economic output, according to the Bank for International Settlements. That is unusually high for a developing country and up from 143 per cent in 2008.
Communist 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.
S&P lowered its rating on China’s sovereign debt by one notch from AA- to A+, still among its highest ratings.
“A prolonged period of strong credit growth has increased China’s economic and financial risks,” said S&P in a statement.
The downgrade could raise Beijing’s borrowing costs slightly but is more significant for its impact on investor sentiment.
Chinese economic growth fell from 14.2 per cent in 2007 to 6.7 per cent last year, though that still was among the world’s strongest.