MARC has affirmed its public information foreign currency sovereign rating of AAA/stable on the People’s Republic of China, based on its national rating scale. The AAA rating reflects several of China’s credit strengths, including a relatively resilient economy, which is large and well-diversified. China also has ample foreign exchange reserves — the world’s largest — to buffer against external shocks. A policy regime of tight controls over its capital account also helps reduce the risk of financial instability stemming from hot money flows. In addition, the Chinese government has a strong reform agenda aimed at, among other things, improving competitiveness and growth sustainability.

Key credit challenges include keeping growth sustainable as well as ensuring economic and financial stability amid ongoing economic rebalancing efforts and the trade war. Risks have spiked because of the coronavirus disease (COVID-19) pandemic. However, there have been regulatory successes. Shadow banking activity, for example, continued to decline in 2019 on the back of a crackdown on the sector. The crackdown has helped reduce the interconnectedness between banks and non-bank financial institutions, thus lowering potential systemic risk, which is a credit positive development. This, however, has led to a credit crunch for some industries in the private sector, resulting in increased financial tensions.

The stable rating outlook reflects our view of the government’s capacity to maintain economic, financial and social stability in the near term given its positive net financial worth position and control over the economic, financial, and political systems. It also reflects our expectation of, among other things, the government’s continued pragmatic policymaking, institutional reforms and ability to respond credibly to economic and financial stresses. We are nevertheless cautious on the outlook because of elevated geopolitical and geo-economic uncertainties, especially related to elevated trade protectionism. More importantly, the COVID-19 pandemic has raised economic and financial tensions within as well as outside of China. While we expect the economic impact of the global pandemic to be significant, the degree of the impact will depend on, among other things, how the situation plays out. We will continue monitoring the situation.

Evidence of the effectiveness of fiscal and monetary policy easings to maintain economic and financial stability will be positive for China’s credit profile. Conversely, negative rating pressure could develop if further fiscal and monetary easings prove ineffective, if the policy easings cause a substantial rise in attendant risks, or if the COVID-19 pandemic worsens significantly. 

-Ends-

Contacts: Quah Boon Huat, +603-2717 2931/ boonhuat@marc.com.my
Nor Zahidi Alias, +603-2717 2936/ zahidi@marc.com.my 

[This announcement is available on MARC’s corporate website at www.marc.com.my ]

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) based on information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

© Press Release 2020

Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.

The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.

To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.