Bangkok--23 Aug--Standard & Poor's Standard & Poor's Ratings Services today assigned its 'A' senior unsecured long-term local currency debt ratings on Export-Import Bank of China's (China EXIM; A/Positive/A-1) Chinese yuan (CNY) 2 billion bonds issued in Hong Kong. The issue consists of two tranches: a retail tranche of CNY1 billion 3.05% due Aug. 24, 2009, and an institutional tranche of CNY1 billion 3.20% due Aug. 24, 2010. China EXIM is the second mainland bank to issue such bonds in Hong Kong, after the China Development Bank (CDB; A/Positive/A-1) issued CNY5 billion worth of bonds from June 26, 2007, to July 6, 2007. "Standard & Poor's issuer credit ratings on China EXIM reflect expectations of strong support from China's government (A/Positive/A-1), its sole owner. The ratings assigned to the CNY2 billion bond issue reflect the long-term issuer credit ratings on China EXIM," said Standard & Poor's credit analyst KimEng Tan. "This indicates China EXIM's close relationship with the government and the importance of the institution's policy role." Work is currently being carried out on a draft law that, when enacted, is expected to better define China EXIM's role, activities, prudential guidelines, and relationship with the government. China EXIM is one of three policy banks wholly owned by the central government through the Ministry of Finance (MOF). Apart from the central bank, the People's Bank of China (PBOC), the policy banks are the only financial institutions reporting directly to the State Council, China's highest executive organ. The central government guides China EXIM's funding and business strategy, although the bank enjoys relative autonomy in its project evaluation and approval process. The government has supported China EXIM through capital injections as well as offering it preferential funding. In the first few years of the bank's existence, the government contributed to the bank's capital annually through fiscal allocations. On an ongoing basis, the bank receives interest subsidies from the MOF for policy loans extended at below the cost of funding. For short-term liquidity support, China EXIM can also draw funds from the PBOC. The strong policy role of China EXIM is not expected to be significantly changed in the near to medium term. The bank provides export financing to industries and firms supported by the government. It is also a conduit for foreign official funding for projects within the country, and for Chinese government concessional lending to other countries. "The positive outlook on the issuer rating on China EXIM is in line with the outlook on the sovereign rating. However, a weakening of China EXIM's policy role or in the level of support from the government, or a reduction in the sovereign's ability to support the bank would weaken the credit rating," Mr. Tan noted. Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search. Media Contact: David Wargin, New York (212) 438-1579 [email protected] Analyst Contacts: KimEng Tan, Singapore (65) 6239-6350 Ping Chew, Singapore (65) 6239-6345 YeeFarn Phua, Singapore (65) 6239-6341