The ratings agency said on Thursday it had lowered the ratings to ‘A+’ from ‘AA-‘ and the short-term rating to ‘A-1’ from ‘A-1+’. The outlook on the long-term rating is stable.
“We have also revised our transfer and convertibility risk assessment on China to ‘A+’ from ‘AA-‘,” it said.
The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks.
Since 2009, claims by depository institutions on the resident non-government sector have increased rapidly. The increases have often been above the rate of income growth.
“Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent,” it said.