Debt ratio under control, but transparency should be increased: experts
U.S. credit rating agency Standard & Poor's (S&P) downgraded China's outlook from "stable" to "negative" on Thursday in light of potential risks in the nation's economic restructuring.
The revised outlook reflects the agency's expectations that more economic and financial risks will emerge amid the economic restructuring, according to an announcement S&P sent to the Global Times on Thursday.
China's economic growth is expected to remain strong at 6 percent or more annually through at least 2019, S&P noted.
S&P became the second of the "Big Three" credit rating agencies to cut China's outlook.
Moody's downgraded China's outlook to "negative" from "stable" in early March, citing a weakening of fiscal metrics, a continuing fall in foreign exchange reserves and uncertainty over China's capability to implement economic reforms, the Xinhua News Agency reported on Thursday.
However, Moody's downgrade missed the bigger picture and has had little impact on financial markets, the Ministry of Finance said on Wednesday.
Downgrading the country's outlook due to potential risks is logical, but relatively speaking, the situation in China "is much better," Liu Xuezhi, a senior analyst at Bank of Communications, told the Global Times on Thursday.
For example, Japan's government debt has surpassed 200 percent in terms of the debt-to-GDP ratio, and that of the US has surpassed 100 percent, Liu said, noting that China's government debt ratio is still "under control."
Also, S&P believes that government and corporate leverage ratios are likely to deteriorate in China, according to the announcement.
And the ratings also show the agency's assessment of the government's reform agenda after weighing its strengths and weakness, such as lower average incomes, less transparency, and a more restricted flow of information.
"Their major concern is likely to be $5 trillion in local debt that weighs on economic growth," Liu said, noting that tools like another round of debt swaps could be used to avert potential risks.
Also, a more transparent debt information and management platform should be set up, he said.
The debt bubble in China is one of the biggest threats facing global stability today, media reports said in February, and some estimates said that the nation's troubled credit could exceed $5 trillion, which accounts for over 50 percent of the total GDP.
