Dagong downgrades sovereign credit ratings for France

China's rating agency, Dagong Global Credit Rating Co., downgraded local and foreign currency sovereign credit ratings for France from A+ to A on Monday.

"The debt repayment environment of France remains stable but problematic," said the agency website.

Sustained weakness in the French economy means credit demand in the real economy is consistently weak, the agency said, limiting the effect of monetary policy.

Slow structural reform, a rigid labor market and over-regulation are likely to slow the economy and reduce wealth creation. The government deficit ratio rose to 4.4 percent in 2014, weakening repayment capability.

France will enjoy a slight recovery in the short run, mainly through depreciation of the euro, low energy prices and loose fiscal consolidation.

Eurozone quantitative easing will provide strong credit support for the French government's large financing demand and keep its sovereign credit level stable.

Dagong expects stability for both France's local and foreign currency sovereign credit ratings in the next one or two years.

The agency forecast that the French economy will expand by 0.8 percent in 2015 and 1.2 percent in 2016, up from 0.4 percent last year. Endi