(The following was released by the rating agency)
Link to Fitch Ratings’ Report: Scenario: China Rebalanced; What a Rebalanced China Would Mean for Corporates
SINGAPORE/HONG KONG/LONDON, January 23 (Fitch) In its new “China Rebalanced” scenario report published today, Fitch says that Chinese State-owned Enterprises’ (SOEs) ratings, which are typically notched-down from the sovereign rating (foreign currency ‘A+'/Stable) to reflect forms of state support, would be most affected in a rebalanced consumer-led, rather than investment-led, economy as the central government re-prioritises its support for strategic industries.
Some corporate entities would migrate from the ‘A’ rating category to lower levels, while stronger entities may stay capped by the sovereign rating. Industries that had fuelled the previous investment-led economy, like steel and aluminium, would see their ratings transition to representative ‘BBB’ and ‘BB’ rating categories according to company specifics as the economy re-balanced.
Conversely, rated SOEs in the telecom and oil and gas sectors, which are also unlikely to remain among state-supported industries, could stay relatively unchanged with strong stand-alone ratings likely to remain in the ‘A’ rating category.
Whatever the speed of economic transition, today’s report focuses on the likely changes and out-turns that may occur for selective industries if rebalancing occurs. This also requires domestic institutional reform - a factor which is regarded by Fitch to be one of the single largest threats to financial, political and social liberalisation and development of the SOEs and privately owned corporate sector under China’s prospective rebalancing of its economy.
The full report, “China Rebalanced: What a Rebalanced China would mean for Corporates,” is available at www.fitchratings.com