China’s giant debts are starting to worry credit ratings agencies.
Citing rising levels of leverage led credit rating firm S&P to cut its outlook on China from stable to negative, a move that can precede a cut to the firm’s formal credit rating. The move amounts to a public statementthat S&P analysts believe that China has become a riskier borrower.
In recent years China’s total debt—stripping out debt to financial institutions—has surged. It recently has matched that of the world’s biggest debtors, such as the US.
S&P analysts think China’s debt is about to make another leap higher, as Chinese policymakers launch another round of fiscal spending to try to keep economic growth going. China’s GDP growth, while sizzling by the standards of more developed nations, has slumped in recent years.
S&P joins Moody’s and US financial executives as a China worrywart. Earlier this month, Moody’s analysts altered their outlook on the People’s Republic to negative. A new survey of chief financial officers from Deloitte also shows ugly perceptions of China’s economy. Just 9% of more than 100 respondents regard China’s economy as “good,” compared to 41% who viewed the North American economy as “good.”