BEIJING--Standard & Poor's Ratings Services on Friday
affirmed its "AA-" rating on China's long-term sovereign debt, with
a stable outlook.
The agency also reiterated its "A-1+" rating on the country's
short-term debt.
S&P said economic and political developments over the next
two to three years will likely support China's creditworthiness,
with efforts toward deeper structural and fiscal reform
continuing.
But the country's rating could be cut if reform efforts falter,
it said.
On the other hand, if reforms lead to China" exchange rate
becoming more flexible, its macroeconomic tools being more
market-based and its domestic debt market turning more vibrant,
S&P would consider raising its rating.
China's creditworthiness is underpinned by its strong economic
growth prospects, robust external financing position and modest
government debt level, S&P said.
But on the minus side, a lack of transparency and restricted
information flows count against the country. So does its relatively
low per capita income, which makes the country less resilient to
shocks, S&P said.
In particular, the agency flagged opaque local government debt
as a risk. China is midway through a comprehensive audit of local
government debt levels. The total could be almost 20 trillion yuan
($3.3 trillion), or 38% of gross domestic product, according to a
recent estimate by Standard Chartered Bank.
S&P expects the Chinese economy to continue its strong
performance, with real per capita growth to average 6.7% from 2013
to 2016, though this is a step down from 8.6% in the preceding
five-year period.
The agency predicts China's net government debt will be
relatively unchanged around 13%-14% of GDP.
High domestic savings will be more than enough to fund
investment spending, S&P said, while the government's push to
restrict the growth of credit to projects that aren't commercially
viable will help rein in credit risks.
Write to Richard Silk at richard.silk@dowjones.com