S&P wrong to downgrade China rating

A female Chinese worker sews clothes at a garment factory in Huaibei city, East China's Anhui province, June 1, 2015. [Photo/IC]

LAST WEEK, the international credit rating agency Standard& Poor's downgraded its rating of China's long-term sovereign debt from AA-to A+, citing increasing risks due to an accumulation of debt. But that's unfair because S&P has failed to see China's huge potential. Ce.cn comments:

S&P is wrong to downgrade China's credit rating as it has misread the Chinese economy. According to mainstream economics, it is consumption that decides the level and size of an economy. China has huge consumption potential it can tap for sustainable economic development.

Second, S&P has failed to recognize the characteristics of China's financial system. Indirect financing accounts for the majority of China's financial system, and bank loans play the primary role. That is fundamentally different from Western economies, and means the financial risks are more controllable.

As long as Chinese banks continue being cautious in issuing loans and control the risks, the Chinese financial system will remain stable.

Third, S&P has failed to see the efforts and resolve of the Chinese government to maintain stable economic growth while meeting the material and spiritual demands of the people. It has launched supply-side reform, implemented stable monetary policies, insisted on deleveraging, in order to solve the problems in the country's financial system.

Last but not least, S&P has failed to recognize the positive tendency in the Chinese banking sector. For the past few years, Chinese banks have comprehensively strengthened their risk control by optimizing their capital and income structures. In the future, this good tendency in the Chinese banking sector is expected to continue and the whole sector will perform better.