BEIJING (BLOOMBERG) - Standard & Poor's has cut the outlook for China's credit rating to negative from stable, saying the nation's economic rebalancing is likely to proceed more slowly than the ratings firm had expected.

The nation's credit rating is AA- with a negative outlook, S&P said in a statement, which also affirmed the long-term and A-1+ short-term sovereign credit ratings.

"We revised the outlook to reflect our expectation that the economic and financial risks to the Chinese government's creditworthiness are gradually increasing," S&P said in the statement. "This follows from our belief that, over the next five years, China will show modest progress in economic rebalancing and credit growth deceleration."

China's economic expansion will remain at or above 6 per cent a year in the next three years, S&P forecast. The investment rate may be "well above" what S&P says are sustainable levels of 30-35 per cent of GDP.

"In our opinion, these expected trends could weaken the Chinese economy's resilience to shocks, limit the government's policy options, and increase the likelihood of a sharper decline in trend growth rate," it said.

A downgrade could follow if S&P sees a higher likelihood that China seeks to stabilize growth at or above 6.5 percent by increasing credit at a "significantly faster rate" than nominal GDP growth. Ratings could stabilize if credit growth is moderated to levels in line with economic expansion, S&P said.