China refused the downgrade of its ultimate credit rating by the S&P Global Ratings, pointing out that it’s a wrong decision that demeans the s development potential and sound economic fundamentals.
The Ministry of Finance disclosed in a statement on Friday, just after S&P cut the nation’s sovereign rating for the first time since 1999, saying that the government can control its financial stability if it’s sagacious on lending, controlling credit risk, and strengthening supervision. The ministry said the decision is confusing because the nation’s economy has a solid foundation.
China can maintain a good credit growth, and S&G Global seems not to look at the features of the nation’s financing structure. Under the Budget Law, state-owned firms should pay the debt of local government financing vehicles, and the local governments should not bear the cost.
The downgrade by S&P is coming as the second by top rating firms this year, and it comes just before President Xi Jinping calls delegates the proposed Communist Party event which holds twice in a decade and will hold on Oct. 18. Xi has prioritized reduction of debt risk and causing stability before the big moment that will call for the reshuffle of major leaders.
The Ministry was downgraded by Moody’s Investors Service in May, saying it’s groundless to say that state-owned enterprise and local government financing vehicles debt will increase the government’s liability. Moody’s underestimated the government’s capability to implement reforms and increase demand.
Xinhua News Agency, responding to S&P’s ratings, said the downgrade isn’t a surprise because the agency’s theory doesn’t show China fast-rising economy.
According to the state-run news service, the problems S&P found are a mere friendly reminder, and China cannot cut its feet to fit the shoes.