Standard & Poor?s ratings services affirmed ?A? long-term and ?A-1? short term sovereign credit ratings on the People’s Republic of China (China). S&P also affirmed its ?A? long-term and ?A-1? short-term credit ratings on the Export-Import Bank of China (China EXIM) with the outlook remaining positive. The outlook on the credit ratings on China EXIM was similarly revised to positive.
According to Standard & Poor’s credit analyst Kim Eng Tan of the Sovereign Ratings group said ,? China?s reforms in the areas of bankruptcy, property, and labor laws in 2007 have motivated our revision of the ratings outlook to positive. These reforms should underpin a high single-digit trend rate of growth in China and at the same time improve the productivity of investment, thereby reducing the risks of unduly large fluctuations in growth.”
The ratings on China are sustained by the sovereign’s strong external asset position, exceptional economic growth potential, and the government?s continuing improvement of its financial position. While the financial health of a number of China?s large banks needs further improvement, S&P expects sustained efforts at financial reforms to reduce the associated risks markedly in the coming years.
The key weakness, according to S&P, in China?s credit profile remains the inability of policy makers to rely on bottom-up market-oriented instruments for macroeconomic management.
Instead, policy makers appear to prefer top-down administrative measures to manage the economy.
?The ratings on China could rise if its leadership embraces market-based policies more readily, or if the government strengthened public finances further.?