S.&P. Downgrades Chinas Debt, Citing a Surge in Lending
Last edited Thu Sep 21, 2017, 09:33 PM - Edit history (1)
SHANGHAI — China and the world received a fresh warning on Thursday that the country’s dramatic debt binge of recent years threatens the stability of one of the global economy’s most important growth engines.
Standard & Poor’s downgraded its rating on China, saying that the country’s strong economic growth has been fueled by heavy borrowing — and that it expects that borrowing to continue. That could hurt the ability of the world’s second-largest economy to handle potential financial shocks, like a crisis among its banks, and could lead to longer-term growth problems.
The downgrade — which follows a similar move four months ago by Moody’s Investors Service, a rival debt-rating firm — offers a reminder of the challenges the Chinese economy faces as it matures and growth slows.
It also comes at a politically sensitive time for Beijing, which has emphasized stability ahead of an important Communist Party Congress next month. The meeting is held only once every five years and could result in some significant changes among the country’s top officials. Chinese leaders, who prize stability above just about everything else, have tightened their grip on the military, economy and society in recent months to ensure a smooth transition. . .
State-controlled banks have been funneling big loans to wasteful, chronically unprofitable state-run companies. Indebted local governments have been borrowing heavily as well. Even China’s national government, fairly cautious in its previous borrowing, has been running budget deficits lately, and the country’s famously frugal households have begun using more credit.
“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks,” S.&P. said in a statement.'>>>
https://www.nytimes.com/2017/09/21/business/china-sp-downgrade-debt.html?
