Moody’s maintains stable outlook for Chinese banking system amid US-China trade spat

The US-based rating agency, Moody’s Investors Service, released its latest review report on the Chinese banking system, maintaining a stable outlook.

Key Quotes:

“The operating environment for Chinese banks is deteriorating as the escalating trade tensions with the United States will add further pressure to the country’s economic growth.

Nevertheless, Moody’s maintained its stable outlook for the Chinese banking system on stable liquidity and adequate capitalization.

Despite the ongoing trade tensions and slowing economic growth, accommodative government policies will support the asset quality of Chinese banks over the next 12 to 18 months while capital and liquidity also remain adequate.

However, profitability will weaken on declining asset yields due to looser monetary policy and interest rate reform and continued high credit costs to reflect high corporate leverage and a slowing economy.

Asset performance will benefit from the government’s accommodative policies, state-owned enterprise borrowers’ mostly stable debt repayment capacity and banks’ acceleration in non-performing loan disposal.

Stable capitalization will be supported by internal capital generation capability and strong capital issuance despite fast risk-weighted asset growth. Liquidity will also stay stable on more accommodative policies.”