S&P Global Rating agency, which downgraded China’s sovereign rating in September improved outlook on the country in its latest report. The agency stated that the country’s national debt growth will slow in the next five years but it will continue to threaten the economy with financial stresses.
The rating agency cut China’s rating on September 21 from AA- to A +, explaining the decision by heightening risks associated with the rapid growth of lending in the country. China’s debt burden could rise by 77 percent to 302 trillion yuan ($45 trillion) in the period from 2017 to 2021, although the growth rate is slowing down, the S&P report said.
“Our base scenario provides that the average figures for China’s credit growth will decrease by one-third, to 12 percent a year between 2017 and 2021,” said S&P analyst Terry Chan. “Despite the slowdown, this indicator is still higher than our forecasts for nominal GDP, which means that high credit risks of the system can continue to grow steadily, which is a danger,” the analyst said.
A separate S&P report published on Friday said that in the fight against high corporate debt, China managed to achieve temporary success, perhaps because of the lack of specific goals and a timeframe for debt reduction.
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