Shi Yaobin, China’s vice finance minister, is a little irked with Standard & Poor’s cutting its outlook for China to negative from stable on Thursday.
On Friday, the vice finance minister, the first senior Chinese official to respond said the ratings agency overestimated the difficulties facing China’s economy when it downgraded the country’s outlook.
With the release of the downgrade, S&P said China’s economic rebalancing is likely to proceed slower than the agency expected. Even as it cut its country outlook to negative from stable, the agency affirmed its AA- long-term and A-1+ short-term sovereign credit ratings.
But S&P said the economic and financial risks to the Chinese government’s creditworthiness are gradually increasing, even as the country’s reform agenda is on track, the agency said.
S&P expects China’s economy to grow at or above 6% annually over the next three years, but says government and corporate leverage ratios are likely to deteriorate, which could weaken the economy’s resilience to shocks.
In early March, Moody’s Investors Service also downgraded the outlook for China.
Both S&P and Moody’s underestimated China’s ability to push forward reforms and to counter risks, Shi said in a strongly-worded statement carried on the ministry’s website.
He also dismissed worries about China’s ongoing reforms of state-owned enterprises reforms.
Before anyone chortles about Chinese ministry propaganda, Asia Unhedged would like to note Shi isn’t the first finance official to cross swords with S&P over a downgrade. Back in August 2011, a senior Obama administration official lambasted S&P after it downgraded US debt. He called it “amateur hour” at S&P because of a debt/GDP math error.
Seems some governments no longer accept what folks like S&P and Moody’s say as holy writ. Might this have something to do with the inexplicable miscalls that some of these agencies made during 2008’s great subprime crisis?
Whatever the case, Asia Unhedged opines it’s a good idea to keep the big picture in mind where China’s concerned. There may be downgrades from western ratings agencies and Beijing may indeed have trouble rebalancing its over $17 trillion economy. (Should be a piece of cake right?)
But when all’s said and done, no one questions that China’s economy will grow at or above 6% for the next few years. That’s something pretty hard to downplay — let alone downgrade.