Fitch may rethink China’s A+ rating amid growing economic woes

investing.com:

Investing.com-- Fitch Ratings may consider rethinking China’s A+ sovereign credit rating amid growing economic headwinds to the Asian giant, especially if corporate debt conditions worsen in the country. 

James McCormack, managing director, global head of sovereign ratings at Fitch said in an interview with Bloomberg TV on Wednesday that while current government debt levels were acceptable, any deterioration in corporate debt conditions could present a risk, especially if the government expands its balance sheet to support corporates.

“If some of these contingent liabilities in other sectors- nonfinancial corporate sectors, in the banks themselves, become real liabilities for the government, if it does really extend its balance sheet to support the economy… then we might think again, because the debt-to-GDP ratio is still a little bit on the high side for single A credit,” McCormack told Bloomberg TV. 

But McCormack said that there was little evidence so far that the government planned to expand its balance sheet to that level of policy support, and that Fitch also did not anticipate such a move from authorities in the near-term. 

He noted that government debt still remained high, with Fitch estimates pegging debt levels at 60% of overall gross domestic product. 

McCormack’s comments come amid signs of a brewing debt crisis in China’s property sector, as Country Garden Holdings (HK:2007)- the country’s biggest real estate firm- flagged a massive first-half loss, and suspended trading in 11 offshore bonds on potential difficulties in meeting its debt obligations.

The firm also missed payments on some coupons earlier this month, fueling fears of a broader contagion in Chinese debt markets, stemming from a potential