Beijing, March 31 Ratings agency Standard & Poor’s (S&P) cut its outlook on China from stable to negative today, warning that economic rebalancing was taking longer than expected. “The economic and financial risks to Chinese government’s creditworthiness are gradually increasing,” it said. S&P kept its rating on Chinese sovereign bonds unchanged at AA-/A-1+. Beijing is grappling with a tough economic transition away from dependence on heavy industries toward a consumer-driven model, but fluctuations in the exchange rate and stock markets have undermined confidence in leaders’ willingness to push through reforms. S&P said that it could downgrade Chinese government bonds this year or next if Beijing tries to keep economic growth at 6.5 per cent by opening the credit floodgates and pushing investment to above 40 per cent of gross domestic product (GDP). This would be ‘well above what we believe to be sustainable levels of 30 per cent to 35 per cent of GDP and among the highest ratios of rated sovereigns’, which it said would weaken the economy’s resilience to shocks. The US-based agency also said its downgrade was motivated by its view that much-needed reforms to hulking, inefficient state-owned enterprises may be ‘insufficient’ to reduce the risks of credit-fuelled growth. It projected the economy would expand at six per cent or more over the next three years, but projected that government debt would rise to 43 per cent of GDP.