S&P lowers outlook on China; says domestic-led economic growth moving “slower than expected”

Ratings agency S&P lowered its outlook on China’s credit rating of ‘AA-‘ to negative from stable, citing the Mainland’s attempts to overhaul its economy from an investment-led and export-oriented one toward domestic-led growth was proceeding at a slower pace than expected.

The move follows that by Moody’s, which lowered its outlook on China to negative earlier in March 2016 for its credit rating of Aa3. Fitch Ratings rated China as ‘A+’ with a stable outlook.

As part of its rationale on the lower outlook on China, S&P outlined the following reasons:

  • gradual increase in economic & financial risk to the government’s creditworthiness
  • weakening of sovereign and corporate credit metrics
  • increased reliance on credit to push the sluggish economy

Source: WSJ