S.&P. Downgrades China’s Debt, Citing a Surge in Lending
Standard & Poor’s downgraded its rating on China, saying the country’s strong economic growth
has been fueled by heavy borrowing — and that it expects that borrowing to continue.
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.
The downgrade — which follows a similar move by Moody’s Investors Service, a rival debt-rating firm, four months
ago — offers a reminder of the challenges the Chinese economy faces as it matures and growth slows.
While economists say China has plenty of financial firepower to address debt-related problems, the speed of the accumulation
and the heavy lending in particular to rusty old industries such as steel and cement could cause issues
The Moody’s downgrade infuriated the Chinese government, which contended
that the move failed to properly reflect China’s $3 trillion in foreign currency reserves along with large holdings of land and other assets.
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.
warned on Thursday that China has been borrowing heavily — too heavily — to sustain that growth.