But S.&P. warned on Thursday that China has been borrowing heavily — too heavily — to sustain that growth.
State-controlled banks have been funneling big loans to wasteful, chronically unprofitable state-run companies. Indebted local governments have been borrowing heavily as well. Even China’s national government, fairly cautious in its previous borrowing, has been running budget deficits lately, and the country’s famously frugal households have begun using more credit.
“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks,” S.&P. said in a statement.
China has acknowledged a number of the problems. It has moved to rein in the proliferation of investment products sold to many Chinese households that funneled money into questionable projects. It has also called to heel a number of Chinese companies that officials believed were making too many reckless acquisitions abroad.
Still, reaction to the downgrade was harsh.
In a lengthy statement on Friday, China’s Finance Ministry called the move “a mistaken decision” and labeled concerns about China’s debt “stale news.” It cited the country’s efforts to close excess factories and streamline industries that suffer from overcapacity and significant moves toward reform. It also cited the Chinese government’s deep financial resources to address any potential debt shocks.
“This type of misreading neglects the Chinese economy’s good fundamentals and development potential,” it said.
The government is likely to be particularly upset because S.&P. issued the downgrade less than a month before the start of the Communist Party Congress. The meeting is expected to reconfirm President Xi Jinping as the country’s core leader, but move some new officials to serve with him.
Mr. Xi has made political and economic stability the country’s top priority in the months leading up to the congress. That has included allowing the state-controlled banking system to continue, and even expand, its already heavy lending since midsummer, while a modest effort in late spring to limit the growth in lending has been pursued with less zeal.
S.&P. downgraded its rating on the country’s sovereign debt by one notch.
Warnings about China’s borrowing are not new.
In the span of nearly a decade, China went from a country with few loans to one with debt levels comparable to those of the…