Monday 26 February 2018

Rating agency warns of downgrade of China and Japan

Fitch Ratings has warned that it could downgrade the credit rating of China within two years.

And they added that there was a greater than even chance of a downgrade of Japan's credit status.

Andrew Colquhoun, head of Asia-Pacific sovereign ratings, said China's local currency debt rating could face a downgrade over the next 12 to 24 months.

Added Mr. Colquhoun: "We expect a material deterioration in bank asset quality."

"If the problems in the banking system pan out as we expect or are even worse over the next 12 to 24 months, then that would incline us to take the rating downwards."

Fitch downgraded the outlook on China's long-term local currency debt to negative from stable in April because of concerns about the country's financial stability after a lending surge over the past two years.

China rating is AA minus, its Finch’s fourth highest level.

Mr Colquhoun also said there was a greater than even chance Fitch will downgrade Japan's credit rating.

This was because the country's public debt is running at about twice the size of the $5 trillion economy.

Both Standard & Poor's and Moody's Investors Service have already cut their credit ratings on Japan because of concerns about the country's high public debt.

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