LONDON: China’s sovereign rating can withstand slower growth and greater volatility, Moody’s senior research analyst Rahul Ghosh said at a briefing in London on Thursday.
Moody’s rates China Aa3 with a stable outlook, and is forecasting GDP growth at 6.8 per cent in 2015 and 6.3 per cent in 2016, in line with International Monetary Fund forecasts.
Ghosh said that Chinese corporate credits in the Moody’s ratings universe, which covers about 200 companies and banks, were likely to be able to absorb a further 5-10 per cent depreciation of the yuan “pretty well”.
A total of 22 companies have a high reliance on foreign currency debt, in sectors such as metals, mining and steel and oil and gas. However, oil and gas producers have a natural currency hedge as their revenues are denominated in dollars, Ghosh said.
In areas such as real estate, however, there was likely to be more of a currency mismatch issue as they receive most of their revenues in yuan.
“In a further 10 per cent devaluation scenario, there would be some impact on the credit metrics for property companies,” Ghosh said.
On China’s banks, Stephen Long, of Moody’s financial institutions group, said that while there was a clear deterioration in asset quality and a rise in bad loans on banks’ books, it was balanced by solid profits and government support.
Moody’s has a stable outlook on China’s banking sector.
— Reuters
