The creditworthiness of China’s financial institutions is likely to get worse, ratings agency Standard & Poor’s warns, adding that the country’s property market is exposed to a “correction”.
On Monday, the agency revised its view of the economic risk trend for China’s banking sector to negative from stable, highlighting that changing economic conditions could have an effect on Chinese banks.
“Credit risks in the Chinese economy may continue to worsen, as indicated by rapidly rising credit losses and still-significant credit growth amid China’s economic slowdown,” a new report said.
“We believe there is a one-in-three chance that the banking sector’s credit exposures to non-financial and non-public sectors in China could surpass 150 percent of the country’s GDP (gross domestic product) in the next two years.”
The risk associated China’s banking sector is now on a par with countries like Bermuda, Brazil, Colombia, and India, the agency said.
It also noted that the downturn risk for China’s property market remains “high” despite signs of stabilization in top-tier cities and stressed that it believed China’s property market remains exposed to a “correction.”