Bangkok--19 Aug--Standard & Poor's
--China's large external asset position, strong growth potential, and modest government debt level underpins its credit ratings.
--We affirmed our sovereign ratings on the People's Republic of China.
--The outlook on the long-term credit rating remains stable.
Standard & Poor's Ratings Services today affirmed its 'A+' long-term and 'A-1+' short-term sovereign credit ratings on the People's Republic of China. The outlook remains stable. The transfer and convertibility (T&C) assessment on China remains 'A+'.
"The sovereign credit ratings on China reflect a relatively modest level of government indebtedness, the country's strong external asset position, and an exceptional economic growth potential," said Standard & Poor's credit analyst Kim Eng Tan. "These strengths outweigh sizable contingent liabilities in the banking system that could materialize should an extended economic slowdown play out."
The Chinese government faces moderate risks of balance sheet damage if there is a steeper and more prolonged economic slowdown than currently expected. The viability of many public enterprises, only partly reformed and often highly leveraged, would be threatened in such a scenario, and the government likely would have to absorb a significant part of the resulting losses of local banks.
The stable outlook reflects Standard & Poor's view that China's substantial foreign exchange reserves and strong fiscal position will permit the government to absorb future balance sheet losses from the broader public sector with little damage to its credit standing. The ratings could be raised again if structural reforms lead to sustained improvements in the operational and financial performances of key domestic industries, especially financial institutions. Conversely, a flagging reform effort, combined with a markedly weaker economic performance and a greater deterioration of banking sector credit metrics than we currently expect, could result in downward pressure on the ratings.
RELATED RESEARCH
--"Credit FAQ: Is Rapid Loan Growth Putting China's Banking Reforms At Risk?" published July 10, 2009 on RatingsDirect.
--"Asia Pacific Report Card: Amid Encouraging Signs, A Bumpy Road Lies Ahead," published June 9, 2009.
--"Will The U.S. Dollar Be Clipped?" published April 21, 2009.
--"China's Stimulus Plan: Local Governments Get More Fiscal Freedom, But Can They Unleash Productivity?" published March 15, 2009.
--"Sovereign Credit Ratings: A Primer," published May 29, 2008.
Complete ratings information is available to RatingsDirect subscribers 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 Find a Rating.
Media Contact:
David Wargin, New York (1) 212.438.1579, [email protected]
Analyst Contacts:
KimEng Tan, Singapore (65) 6239-6350
David T Beers, London (44) 20-7176-7101
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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