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      Scope takes no action on the People's Republic of China
      FRIDAY, 29/01/2021 - Scope Ratings GmbH
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      Scope takes no action on the People's Republic of China

      No action has been taken on the People's Republic of China following a monitoring review.

      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.

      © 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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