China's Debt Surge Has Potential to Pressure Ratings, S&P Says
- Yuan depreciation expectations spurring onshore borrowing
- Nation's debt as percentage of GDP was 232% at end of 2014
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China is facing systemic risks and potential pressure to its ratings as record-low interest rates and a scramble to repay overseas corporate loans fuel a borrowing spree, according to Standard & Poor’s.
The yuan’s worsening outlook is spurring some Chinese companies to raise funds onshore to pay down foreign-currency debt, which could contribute to higher domestic leverage over the next one to two years, Kim Eng Tan, senior director of Asia-Pacific sovereign ratings, said in an interview in Shanghai. Also, local firms tend to borrow as much as they can during an easing cycle, he added.