S&P last downgraded China in 2017 but rival agency Moody's put Beijing on a downgrade warning in December, citing concerns Beijing would have to bail out more local governments due to the country's property market crash.
S&P analyst Kim Eng Tan said pessimism about China needs to lift so that the economy rebounds and fiscal pressures ease - an improvement currently factored into S&P's A+ stable credit score.
If this improvement is "postponed quite a bit further into the future than we currently think - which is within the next year or two," S&P may have to reflect this view in the rating, Tan said during a webinar.
That "means there could be a rating action in the negative direction," he added.
Tan stressed that for now the signals were "mixed" and cited a still "decent chance" that the economy rebounds "quite a bit" this year.
If that bounce needs a lot more stimulus than planned, "the arguments for a negative rating action will strengthen" as China's debt would increase faster, he added.
Credit Default Swap markets, which are used to by investors to hedge the risk of holding a country's bonds, have priced in a series of Chinese rating downgrades since 2022.
(Reporting by Marc Jones; Editing by Richard Chang)
