S.&P. Downgrades China’s Debt, Citing a Surge in Lending<br />Standard & Poor’s downgraded its rating on China, saying the country’s strong economic growth<br />has been fueled by heavy borrowing — and that it expects that borrowing to continue.<br />SHANGHAI — China and the world received a fresh warning on Thursday<br />that the country’s dramatic debt binge of recent years threatens the stability of one of the global economy’s most important growth engines.<br />The downgrade — which follows a similar move by Moody’s Investors Service, a rival debt-rating firm, four months<br />ago — offers a reminder of the challenges the Chinese economy faces as it matures and growth slows.<br />While economists say China has plenty of financial firepower to address debt-related problems, the speed of the accumulation<br />and the heavy lending in particular to rusty old industries such as steel and cement could cause issues<br />The Moody’s downgrade infuriated the Chinese government, which contended<br />that the move failed to properly reflect China’s $3 trillion in foreign currency reserves along with large holdings of land and other assets.<br />Even China’s national government, fairly cautious in its previous borrowing, has been running budget deficits lately,<br />and the country’s famously frugal households have begun using more credit.<br />warned on Thursday that China has been borrowing heavily — too heavily — to sustain that growth.
