BEIJING -- China's complex economic and financial situation makes it hard to describe the country's outlook in just a few words -- even for U.S. ratings agency Standard & Poor's.

On Thursday, the agency lowered the outlook for China's government bonds from stable to negative. But that does not necessarily mean they were entirely pessimistic about the future, company representatives stressed during a teleconference on Friday.

While explaining that China's sluggish economic restructuring led to the downgrade, Kim Eng Tan, a senior director of sovereign and international public finance ratings at S&P, does not foresee "big issues" in the Chinese authorities' ability to keep the banking system stable over the next few years -- provided the economy continues to expand and credit growth is kept at the current pace. Even though the debt load has increased, he said, "liquidity is quite sizable."

On the subject of capital outflow -- one of the major concerns facing China at the moment -- Tan suggested things might take a turn for the better. He believes expectations of yuan devaluation will slowly cool, and that China will not continue to see such rapid capital outflow, for a number of reasons. The authorities in Beijing have indicated they have no plans to devalue the currency further and have been keeping it relatively stable in recent months.

China's debt exceeds 40% of gross domestic product. Kim argues that sustainable growth requires a ratio of around 30-35%. Today's financial and economic conditions are not unlike those of 1998, when China saw its first formal bankruptcy of a financial institution -- Guangdong International Trust & Investment Company. Then-Premier Zhu Rongji decided to shut it down. But S&P representatives were dismissive of the prospects of something similar happening this time.

S&P's change in outlook followed a similar move by Moody's Investors Service last month. Moody's cited "uncertainty about the authorities' capacity to implement reforms -- given the scale of reform challenges -- to address imbalances in the economy."

People's Bank of China Gov. Zhou Xiaochuan, too, has voiced concerns about the country's highly leveraged economy. "Lending as a share of GDP, especially corporate lending as a share of GDP, is too high," he said on March 20 at the China Development Forum in Beijing.

On the other hand, Shi Yaobin, China's deputy finance minister, in response to the downgrades, said, "It is because the ratings company has overestimated the difficulties China faces while it underestimates China's ability to promote reforms."

Shi also dismissed worries about the national debt and reforms of state-owned enterprises.