The ratings agency Moody’s says that China’s (A1 stable) credit profile reflects a number of positives – robust growth rate and vast size of the economy, high shock absorption capacity, large domestic savings, and ample foreign exchange reserves, but faces key challenges like deleveraging in the financial and real economies, improving capital allocation and maintaining financial stability.
Key quotes (Source: Reuters)
China’s credit profile balances economic strength and structural challenges
Change in China’s economic structure gathering pace; activity increasingly centered on higher value-added sectors with greater growth potential
De-risking in China will need to be carefully calibrated to avoid the potential for systemic risks
China’s stable outlook on the view that government control of significant parts of the economy, financial system provides scope to maintain economic, financial stability in near term
Evidence of structural reforms effectively stemming a rise in leverage without an increase in risks in banking, shadow banking could be positive for China’s credit profile
Authorities’ ability to support economic growth and key borrowers is an important stabilizing factor for China’s banking system
Expects china’s official support for major banks to remain strong, reflecting policy imperative of maintaining public confidence, systemic stability