Four reasons why China’s credit rating downgrade matters

International rating agency S&P Global has downgraded China’s sovereign credit rating, citing the country’s growing debt risks.

China’s finance ministry said on Friday the move was the wrong decision and that the agency had ignored the country’s sound economic fundamentals and development potential.

Another ratings agency, Moody’s, downgraded its crediting rating for China in May, also citing concerns about growth and levels of debt.

So what will be the impact of the latest downgrade?

1. Government narrative questioned

A sovereign credit rating downgrade is a small public relations crisis for the Chinese government. Beijing is sparing no efforts to try to convince domestic and overseas audiences that the Chinese economy is doing fine and what problems exist are being dealt with properly.