Prodding China to continue its deleveraging efforts

Singapore

S&P GLOBAL Ratings downgraded China's long-term sovereign credit rating by one notch on Sept 21 to A+ from AA-.

The move was not a surprise because the concerns that S&P cited, namely increasing risks from China's rapid debt accumulation, have been known to the market for a long time. Indeed, S&P's downgrade only followed similar action by Moody's Investors Service in May. Hence, it is unlikely to cause any major market reactions. Foreigners only have a small holding of Chinese assets. Local investors' action is more important, but capital controls are still in effect, despite some slight relaxation recently, which will limit any market impact due to potential capital outflows.