S&P lowers China’s credit rating a notch, also changes outlook to stable from negative

S&P has downgraded China’s rating to A+ from AA-, while changing its outlook to stable from negative.

S&P Global Ratings has downgraded China’s rating to A+ from AA-, Picture: AFP

Standard & Poor’s has lowered China’s sovereign credit rating, joining a growing chorus of alarm over the nation’s soaring debt levels despite government pledges to fend off financial risks.

S&P Global Ratings tonight downgraded China’s rating to A+ from AA-, while changing its outlook to stable from negative. The action brings all the three major credit-rating firms in line in terms of their views of the creditworthiness of the world’s second-largest economy. Fitch Ratings lowered China’s rating in 2013, and Moody’s Investors Service did so in May.

The downgrade of China’s rating, the first such move by S&P since 1999, reflects its assessment that “a prolonged period of strong credit growth has increased China’s economic and financial risks”.

Market reaction to the move, announced after China’s stockmarkets closed, was muted with little movement in the yuan, which edged down 0.3 per cent against the US dollar in mainland trading, reflecting the dollar’s overnight strength following the latest Federal Reserve meeting.

Global investor sentiment toward China had shown signs of improvement in recent weeks. In the credit markets, the cost of default protection on Chinese sovereign debt earlier this month fell to its lowest levels in more than two years, according to data from IHS Markit .

“The timing for the S&P downgrade is a little bit surprising to me,” said UBS economist Wang Tao.

-Dow Jones Newswires