S&P Says “Real Possibility” of Credit Downgrade for China

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S&P Global has flagged a potential downgrade of China’s sovereign credit rating just a month after Moody’s dialled down its own reading for the first time in three decades.

S&P’s chief sovereign analyst said that there was a “real possibility” that China’s credit rating would be cut further from its current AA- with a negative outlook, due to concerns over the country’s burgeoning debt levels and fraught economic transition.

“The Chinese rating has a negative outlook, signalling that a downgrade is a real possibility,” said Mortiz Kraemer to the Reuters Global Markets Forum chatroom.

According to Kraemer S&P’s decision would depend on whether China would successfully transition from its credit and investment driven growth model towards a more balanced and sustainable consumption-driven economy.

While Kraemer said that while China had made some progress in its economic transition, so far the process “has been fairly slow.”

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