BEIJING - Standard & Poor's (S&P) maintained China's sovereign credit rating late Tuesday with a stable outlook, contrasting sharply with the agency's Monday announcement of putting 15 of the 17 Eurozone countries on negative watch.
China's long-term credit rating was kept at AA-, the fourth-highest level on S&P's scale, and its short-term rating was maintained at A-1+, S&P said, citing China's robust economic growth prospects, large holdings of overseas assets and modest government debt.
The ratings company said it may raise China's credit rating if the country's structural reforms lead to a more vibrant domestic capital market, the government relies more on market operations for macroeconomic management and the country adopts a more flexible exchange rate policy.
The announcement by the ratings agency came after it warned Germany and the five other AAA-rated Eurozone countries that they risk having their top-notch ratings downgraded because of the region's escalating debt crisis.
The threat of lower ratings and S&P's downgrade of the US credit rating in August both reflect different development routes adopted by China and these western countries.
China has been focusing on boosting economic development, eliminating poverty, and strengthening trade ties with all countries in recent years, while western countries have spent lavishly on wars in Iraq and Afghanistan and, more recently, on the conflict in Libya.
French military operations in Libya had cost 160 million euros as of June, according to France's Budget Minister Valerie Pecresse.
US military expenses rose 2.8 percent to reach $698 billion last year -- nearly 6 times as much as China's military spending.
Compared with a high savings rate in China, some consumers in the US and EU have lived beyond their means. Lenders paid no attention to how credit was spent, and regulators stood idly by.
For example, Chinese buyers have to pay at least a 30-percent down payment for the first home they buy, and 60 percent for second homes, while US banks required very low or even no down payments for low-income earners, which led to the financial crisis in 2008.
"Chinese people tend to delay gratification until they can afford to buy their desired products. The western concept of bubbles with tremendous levels of leverage on home buyers is not the case in China," said Zhang Yansheng, director of the Institute for International Economics Research of the National Development and Reform Commission.
Meanwhile, well-developed welfare systems in the US and EU have made workers slothful and inclined to spend earnings they plan to have in the future.
S&P's affirmation of China's sovereign ratings dismissed concerns that the country is on the verge of collapse.
The agency said China's economy will expand by 8 percent annually over the next five years -- a growth rate slower than the 11-percent increase recorded during the 2006-2010 period, but still high compared to the US and EU.
S&P said government debt is expected to fall as a share of gross domestic product, with the ratio of net government debt to GDP falling to nearly 10 percent by 2014.
The affirmation of China's credit rating will help the country obtain more international loans, cut its borrowing costs and attract more overseas investment, said Liang Xiaomin, an economics professor with Tsinghua University.
China's domestic rating agency Dagong Global Credit Rating Co said Monday that it maintained the local and foreign currency sovereign credit rating of China at AA+ and AAA with a stable outlook.
S&P raised China's rating to AA- on Dec 16, 2010.
