S&P Cuts Chinese Credit Rating

S&P Cuts Chinese credit rating.  They cite a risk from enormous debt growth.

S&P Global Ratings cut the credit rating on Chinese sovereign debt.  S&P cited soaring debt as the reason.

The country’s credit rating for its sovereign debt was cut by one step, to A+ from AA-.  In addition, S&P lowered  their rating on three banks that operate primarily in China.  These are HSBC China, Hang Seng China and DBS Bank China Ltd.  S&P said that these banks would be unlikely to avoid default should the nation default on its sovereign debt.

The downgrade represents ebbing international confidence that China can strike a balance between maintaining economic growth and cleaning up its financial sector.  Meanwhile the move may also be uncomfortable for Communist Party officials.  The Party is just weeks away from their twice-a-decade leadership reshuffle.

The Chinese economy is forecast to slow after a robust first half.  And economists expect that the country’s growth will remain above 6 percent through 2019.

Furthermore, S&P lowered Hong Kong’s credit rating.  This reflects the strong linkages between the financial hub and mainland China.

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