2017.09.2204:05:00UTC+00S&P Trims China’s Credit Rating Over Growing Debt Fears

S&P Global Ratings trimmed China's sovereign credit rating for the first time since 1999, citing risks from growing debt, and also changed its outlook to stable from negative.

The agency cut China's sovereign rating from AA- to A+, putting it in a similar category with countries like the United States and Austria. This is the second downgrade from a major ratings agency for China in 2017.

The analyst also lowered their ratings on three foreign banks that operate in China, claiming that it is unlikely for HSBC China, Hang Seng China and DBS Bank China Ltd. to evade default should the nation default on sovereign debt.

The downgrade implies declining international confidence that Beijing would be able to reach a balance between maintaining economic expansion and cleaning up its financial sector.

The Finance Ministry in Beijing previously refuted the downgrade by Moody's Investors Service, claiming that the company has overestimated economic difficulties.

The Chinese government has been stimulating the economy as it aims to double its size between 2010 and 2020. It has also allowed non-financial sector debt to increase rapidly. Overall debt has soared since the financial crisis to reach $28 trillion at the end of 2016.

S&P said the recent government efforts to control borrowing by companies could help alleviate financial risks, although it still expects that Chinese corporate debts will continue to increase over the next two to three years at levels that raise financial risks gradually.