Credit rating cut a reckless move

In response to Standard& Poor's recent downgrading of China's sovereign credit rating from AA-to A+, China's Ministry of Finance said it was a "wrong decision" that ignored China's economic strength.

"A prolonged period of strong credit growth has increased China's economic and financial risks," S&P said in its statement announcing the change, adding that the growth in credit has supported China's economic growth but "also diminished its financial stability to some extent".

However, the decision is hard to understand as the fundamentals and quality of China's economic growth have improved and the authorities are able to control credit risks. Using China's credit growth and debt burden while failing to take account of such factors as the structure of China's financial market, and its economic resilience and growth potential, simply reflects that S&P lacks a precise and objective perspective for assessing China's economic and financial health and its lack of understanding about China's actual conditions.