Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews of an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the People's Republic of China (A+/Negative; S-1+/Negative) on 28 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

China’s A+ ratings reflects the country’s economic and financial-sector resilience over the current Covid-19 crisis to date, with the economy expected to account for above a third of global growth this year. In addition, significant external-sector strengths, underpinned by high and increasing levels of foreign-exchange reserves, low external debt and gradual internationalisation of the renminbi, alongside comparatively low levels of central-government debt and high trend growth in a large, diversified economy support the ratings. The government has, moreover, the unique capacity as well as commitment to facilitate rapid and effective reform to address longer-term risks such as financial-stability risk and the gradual opening of the Chinese economy to foreign investment as well as new challenges such as those in relation to climate change. In addition, Scope regards steps taken towards centring policy focus on the quality rather than the quantity of economic growth going forward – including potentially lowered emphasis on quantitative annual growth targets – to be credit positive, supporting a reduction of system-wide risks. However, the Negative Outlook reflects risks from significant fiscal deficits that predate this crisis and have only expanded since the crisis escalated, rising general government debt ratios including significant off-balance-sheet debt issued by local government financing vehicles, as well as high and increasing levels of non-financial sector debt including in the corporate and household sectors. 

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Director.

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