Standard & Poor's Ratings Services (S&P) said Wednesday that it had raised both long-term and short-term foreign currency ratings on the People's Republic of China by one notch to BBB+/A-2. The outlook is positive.
S&P said the upgrade reflected China's more resilient economy after sustained structural reform, and the government's broader revenue base, which relieved spending pressure and provides room for maneuver in pushing ahead with ongoing reform.
S&P has also raised its long-term credit ratings on China Mobile (Hong Kong) Ltd, China National Offshore Oil Corp, CNOOC Ltd and Huaneng Power International Inc from BBB to BBB+.
Progress made in the past few years had made China's economy more market-oriented and less reliant on government spending to maintain GDP growth, said Ping Chew, director in Standard & Poor's Sovereign and Public Finance Ratings group at a televised conference on Feb 18.
Moreover, he said that the state sector, although still inefficient, had boosted its profitability, spurred on the booming domestic economy and high commodities prices.
He said the government's banking system reform program, including the recent 45 billion US dollar capital injection into two state-owned commercial banks that enhanced their balance sheets, signified further efforts to run the banks into commercial entities.
The overall improvement in the economy, combined with tax reform and tighter administration, had boosted general government revenue to an estimated 19 percent of the GDP in 2003, from 13 percent in 1998, he said.
He said the positive outlook reflected Standard & Poor's expectation in the pace of economic reform. A strengthening of market institutions would sustain growth and raise its potential and continued reform of the state sector would moderate the contingent liabilities to the government.
Chew said that despite considerable economic and social challenges, China's policy-makers had not wavered in executing reforms gradually and steadily, and their policies had been stable and predictable. This had provided the platform for excellent growth prospects. China's real GDP growth is expected to be sustained above 7 percent in the next few years.
He said China now faced high level of consolidated government debt and considerable challenges to build a resilient and effective market-oriented economy.