S&P Global Ratings has lowered China’s credit rating, citing China’s prolonged period of strong credit growth which has increased its economic and financial risks.

China’s outlook is classed as stable, reflecting S&P’s view that China will maintain a strong economic and fiscal performance over the next three to four years.

China’s long-term sovereign credit rating has been adjusted to 'A+' from 'AA-' and the short-term rating to 'A-1' from 'A-1+'. S&P has also revised their transfer and convertibility risk assessment on China to 'A+' from 'AA-'.

The timing is interesting because China's Ministry of Finance is looking to issue its first US dollar sovereign bond since 2004. The Postal Savings Bank of China is also expected to price today what could be Asia's biggest AT1 US dollar offering.

The move follows Moody’s downgrade of China’s sovereign debt in May of this year. Fitch affirmed China’s A+ rating as stable in July.

“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China's economic and financial risks. Since 2009, claims by depository institutions on the resident non-government sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent,” says S&P in a note.

S&P also says that the recent intensification of government efforts to rein in corporate leverage could stabilize the trend of financial risk in the medium-term, adding that they foresee that credit growth in the next two to three years will remain at levels that will increase financial risks gradually.