Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
China’s Economy in the Post-Crisis World Carnegie Endowment, Washington, D.C. Tom Byrne, Senior Vice President, Asia-Middle East Regional Credit Officer, Moody’s Investors Service Tom Byrne, SVP – Regional Credit Officer for Asia and Middle-East MARCH 17, 2010 2 China’s Rating Story: A “Growth and Stability Pact” China: Inflation, Real GDP Growth and Moody's Ratings Real GDP %change CPI Inflation Rating Change 30 25 A1 20 A2 POS A2 15 10 A3 A3 0 A3 POS A3 5 A3 NEG Baa1 20 08 20 06 20 04 20 02 20 00 19 98 19 96 19 94 19 92 19 90 -5 19 88 % change inflation, GDP A1 POS CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010 3 Positive Outlook on China’s Sovereign Credit Rating (rating action taken in November 2009) » Very low vulnerability to external credit market and financial shocks » High household and corporate savings aid financial and macroeconomic stability » Low, affordable government debt with ample fiscal headroom for domestic shocks » Contingent financial sector liabilities manageable and non-disruptive » Pragmatic and cautious policies have reduced systemic risks What would change the rating up: “Maintenance of robust government finances and macroeconomic stability would put upward pressure on the rating. Continued institutional strengthening would improve credit fundamentals over the long-term.” CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010 4 Adequately high degree of government debt affordability ChineseGovernment Gov Generic10-year 10 yearBond Bond Chinese Yield 5 4.5 4 3.5 3 2.5 2 1.5 1 8 9 8 09 10 08 09 08 09 08 09 10 08 09 -0 -0 -0 r r r r y y y y y h h h ay ay be be ul ul ar ar ar be be rc rc rc J J u u u M M a a a m m m m n M M M an an te te ve ve Ja J J p p o o e e N N S S CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010 5 Financial Sector Risks: Manageable and Non-disruptive » Banking Sector Industry Outlook changed to stable from negative in January 2010 – Along with 11 other Asian systems, while four remain negative » Entering 2009, the banks had high capital levels, low NPLs and were well provisioned – Last year’s credit surge will require some capital strengthening, needs vary by bank » No destabilizing deterioration in loan quality despite anticipated rise in NPLs in 2011 » ICBC, CCB and BOC Bank Financial Strength ratings on review for possible upgrade – If positively concluded, these banks’ BFSRs would rise close the global average » Stress Test: Banks now need more regulatory capital; capital could be depleted under a severe stress test scenario which plays out over a multi-year timeframe. CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010 6 What Could Go Wrong Over The Outlook Horizon A range of concerns, but fears of a boom-bust collapse are exaggerated in the next one to two years. Our primary concern: “….whether the economic stimulus program may lead to the build-up of a significant level of contingent fiscal liabilities…. emerging from provincial- and local government-level finances, and whose off-budget interventions are not well understood and need closer scrutiny.” (November 9, 2009 Press Release) Other concerns: •Ability to maintain low inflationary expectations •Threat to export growth from trade frictions with the US and EU •Advancing further institutional development CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010 [email protected] 8 © 2009 Moody’s Investors Service, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall MOODY’S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY’S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY’S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. Moody’s Investors Service, Inc. (“MIS”), a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” CHINA’S ECONOMY IN THE POST-CRISIS WORLD MARCH, 2010