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Fitch Ratings Agency Cuts China's Credit Standing

An employee counts Chinese yuan notes inside a bank in Taipei, Feb. 6, 2013.
Fitch Ratings has cut one of its key ratings of Chinese government debt, citing "underlying structural weaknesses" in the world's second largest economy.

Fitch, one of the world's three main credit rating companies, said Tuesday that "risks over China's financial stability have grown."

The ratings company downgraded China's local currency, yuan-denominated debt from AA- to A+ but did not change the rating for foreign-currency debt traded on international markets, which is supported by $3.4 trillion in foreign-exchange reserves. The world's two other main credit-rating agencies, Moody's and Standard & Poor's, have not cut their ratings on Chinese debt.

Fitch said it was cutting the domestic Chinese debt rating because of low average incomes in the country, lax financial governance and rapid expansion of debt. The ratings agency said it also was worried about the growth of lending by what it described as shadow banks, lightly regulated investment companies such as trusts.

Fitch said the growth of lending from sources other than banks is a "growing risk from a financial stability perspective."