China’s Credit Rating
In the news on radio this morning, I heard that the S&P Global ratings cut China’s sovereign credit rating due to the risk in her rising debt profile. This is the first time since 1999 that China’s rating has been adjusted. The previous rating of AA- was cut to A+. The rating change is an indication that the economic and financial risks of the country has increased following a period of strong credit growth. According to the ratings it still means that China has a strong capacity to meet its financial commitments, but is somewhat more susceptible to an adverse effect of a change in circumstances and economic condition than previously. Statistics show that China’s total non- financial sector debt reached 235 percent of GDP in 2016 and IMF projects that China’s total non-financial sector debt would reach around 290 percent of GDP in 2022. With a debt profile of that size, there is little wonder why S&P is alarmed and had to revisit their rating.