China’s Credit Ratings at Risk Amid Turmoil

China’s credit ratings are at risk due to its political upheaval, and the nation may face increased difficulty raising money in world financial markets for economic development projects, experts say.

Moody’s Investors Service recently put its ratings of Chinese bonds on review for a possible downgrade. Japan’s credit-rating agencies also said they are re-examining their assessment of China’s debt.

Should the credit-rating companies lower their ratings, China may have to pay a higher interest rate on future bond issues.

The price of existing Chinese bonds has plunged on European markets in reaction to the government’s crackdown on pro-democracy demonstrators. China has more than $1 billion worth of bonds in circulation on the Euromarkets.

In addition, the turmoil has delayed a new $100-million bond offering in Japan by one of China’s provincial development corporations, stalled a $120-billion Japanese bank loan to a Chinese petrochemical company, and held up a $60-billion agricultural loan from the World Bank.

Analysts say it’s too soon to say what lasting impact the upheaval may have on China’s ability to borrow overseas from commercial and governmental sources.

“It’s already going to be marginally more expensive, but the question is, how much higher,” said Rick Harbaugh, an analyst for the WEFA Group, a financial forecasting firm.