I think the point is that they rely on foreign lending to help fuel economic growth by flooding institutions with money, a practice that is unsustainable in the long term, and that their rating is being downgraded because their growth numbers are artificially inflated in this way.

This explains why there aren't external forces that can check the growth in credit.

But there has been an explosion in debt within China, financing ultimately non-productive investment. Even with a positive external debt outlook, you can get wild economic imbalances within a country via uncontrolled credit creation. The hangover could be profound.

To put it another way: why do you think centrally-planned economies are frequently outpaced by capitalist economies? Misallocation of resources. Debt binges are similarly distorting.

You mean Chinese debt is held in their own currency?