S & P plans to downgrade China – The Express

The decision means S & amp; P may within six to 24 months to lower the long-term rating of the second largest economy, held for the moment “ AA – .”

“ This revision reflects our anticipation of increased financial and economic risks ” blunting the fiscal soundness of the Asian giant, the agency said in a statement.

“ We believe that over the next five years China will enter only limited progress in rebalancing its economy and deleveraging ” Has -she said.

Beijing boasts its strategy of rebalancing its economy towards services and domestic consumption at the expense of heavy industry, a sector weighed down by colossal overcapacity, outdated operation and massive debt.

While the S & amp; P expects that China’s GDP growth is maintained above 6% per year: so far, “ government debt ratios and companies are likely to rise, with an investment rate well beyond the sustainable level of 30 to 35% of GDP , “she says.

Beijing has officially set a growth target of at least 6.5% annually by 2020, and might be tempted to borrow excessively to achieve it, s’ alarm S & amp; P.

This would make the country more vulnerable to shocks and crises, while limiting its room for maneuver in terms of economic policy, the agency estimated.

Her rival Moody’s had already downgraded its outlook in early March on Chinese government bonds, also alarmed by the growing government debt and capital flight, while questioning the abilities Beijing to implement the expected economic reforms.

At Standard & amp; Poor’s, the situation is similar: despite government promises, speed and depth of reforms to restructure large public companies, which dominate heavy industry and mining, are “ inadequate to stem the dangers a doped growth in credit . ”

Already in January, the rating agencies have sounded the alarm over the surge of bad debts in the balance sheet of Chinese banks, that is to say threatened loan non-repayment full darkening of the situation.

Their ratio of bad loans could thus climb to 3% by the end of 2016, against an estimate of 2.2% end 2015 and only 1.7% a year earlier, but noted S & amp; P.

The overall debt of the country – including government and businesses – is approaching 250% of GDP, according to a recent estimate by Bloomberg.