S&P sounds alarm on China's overinvestment
"China has the highest investment-to-GDP ratio in the world - a downturn in its investment cycle would not only adversely affect its economy but also those of others, and global commodities prices," S&P said in a report yesterday.
The mainland's investment-driven growth could put the country at great risk of an economic correction, Standard & Poor's Ratings Services warned, joining other analysts in calling for a timely shift in the country's growth model.
"China has the highest investment-to-GDP ratio in the world - a downturn in its investment cycle would not only adversely affect its economy but also those of others, and global commodities prices," S&P said in a report yesterday.
It underlined the vulnerability of China's growth, and sounded a warning to the rest of the world, whose pace of recovery depends largely on demand from China.
S&P compared the share of investment in the gross domestic product of 32 economies that collectively make up about 85 per cent of global GDP.
"What we found is that China has the highest risk of an economic correction, because of low investment productivity over recent years," S&P credit analyst Terry Chan said.
Commodity-exporting countries like Australia, Brazil, Canada, India, Indonesia and South Africa, along with France and Vietnam, had an "intermediate downside risk", he said.