Fitch Downgrades China's Local Currency Credit Rating
- 11 years ago
Credit rating agency Fitch downgraded China's sovereign debt rating today (April 9), saying it's because of growing risks over China's financial stability.
The move signals increasing concern over the amount of borrowing in the Chinese economy. In its statement, Fitch says China's credit has grown faster than GDP since 2009. Taking into account lending in the troublesome shadow banking system, Fitch estimates credit in the Chinese economy has reached 198% of GDP. Local government debt has also increased from 2011 and 2012 to 25.1% of GDP.
Because of these domestic debt situations, Fitch lowered China's long-term local currency rating to A+, from the original AA-. Fitch did not adjust China's foreign-currency rating. It stands at A+. Fitch believes it's supported by China's foreign currency reserve of more than $3.3 trillion dollars at the end of 2012.
China's growth in borrowing has been accompanied by a rise in local governments unable to pay back their debt. Fitch says local governments could have additional liabilities linked to the corporations that are backed by them. It warns there is a lack of transparency over just how much debt is held by China's local governments.
During the global financial crisis, the Chinese regime actively encouraged borrowing to keep the economy going. At the Boao Forum for Asia currently going on in southern China, economists warned that China could be facing a potential debt crisis. They're urging Chinese leaders to rein in irresponsible borrowing through both traditional bank loans and the shadow banking system.
Subscribe to NTDonChina
☛ http://www.youtube.com/subscription_c...
For more news and videos visit ☛ http://ntd.tv
Follow us on Twitter ☛ http://twitter.com/NTDTelevision
Add us on Facebook ☛ http://on.fb.me/s5KV2C
The move signals increasing concern over the amount of borrowing in the Chinese economy. In its statement, Fitch says China's credit has grown faster than GDP since 2009. Taking into account lending in the troublesome shadow banking system, Fitch estimates credit in the Chinese economy has reached 198% of GDP. Local government debt has also increased from 2011 and 2012 to 25.1% of GDP.
Because of these domestic debt situations, Fitch lowered China's long-term local currency rating to A+, from the original AA-. Fitch did not adjust China's foreign-currency rating. It stands at A+. Fitch believes it's supported by China's foreign currency reserve of more than $3.3 trillion dollars at the end of 2012.
China's growth in borrowing has been accompanied by a rise in local governments unable to pay back their debt. Fitch says local governments could have additional liabilities linked to the corporations that are backed by them. It warns there is a lack of transparency over just how much debt is held by China's local governments.
During the global financial crisis, the Chinese regime actively encouraged borrowing to keep the economy going. At the Boao Forum for Asia currently going on in southern China, economists warned that China could be facing a potential debt crisis. They're urging Chinese leaders to rein in irresponsible borrowing through both traditional bank loans and the shadow banking system.
Subscribe to NTDonChina
☛ http://www.youtube.com/subscription_c...
For more news and videos visit ☛ http://ntd.tv
Follow us on Twitter ☛ http://twitter.com/NTDTelevision
Add us on Facebook ☛ http://on.fb.me/s5KV2C