NEW YORK, New York - Standard and Poors 500 has downgraded Chinas sovereign debt rating, citing concerns over off-balance-sheet debt which it says could equate to 40 trillion yuan ($5.78 trillion).
The S&P report has described the off-balance sheet borrowings by local governments as a debt iceberg with titanic credit risks.
The report says, taking into consideration these borrowings, the ratio of government debt to GDP in China would have equated to an extraordinary level of 60% for last year which S&P said would be alarming.
Standard and Poors noted that Beijing has ordered municipalities to rein in the debt, but thinks it could take China up to ten years to normalise.
Chinas directive to the local government authorities was issued in August and within a month had instituted a monitoring system.
We believe Chinas recent measures to stabilise growth and boost liquidity in response to internal and external headwinds arent necessarily a relaxation of its de-risking efforts, said the report.
Defusing financial risks, including the hidden local government debt, is one of three overarching priorities of the countrys top leadership, the report added.
China's debt rating was lowered by one notch to A+ from AA-.