Rating of China by Standard & Poor's, Fitch and Moody's

Standard & Poor's believes that the most important basis for maintaining the original rating is the high non-performing loan ratio and insufficient provision in China's banking industry; Weak profitability; Capital is insufficient, but in fact, the risk management level of China's banking industry has been continuously improved in recent years, and achievements have been made in controlling the emergence of new non-performing loans. S&P said: "1. The contingent liabilities of China's financial system are increasing. Even if it does not include non-performing loans that have been divested to four asset management companies. At the end of 2002, the recovery rate of non-performing loans in China's financial system may also account for almost half of all loans. According to the recovery rate of non-performing loans in the financial system of 20%, the expenditure required by the China government to recapitalize the financial system will make the government's general debt exceed 80% of the current GDP. 2. It is necessary to establish a governance system that is compatible with the increasingly affluent market economy. " ?

Then according to its own method, Standard & Poor's analyzed, evaluated and explained the credit ratings of 15 financial institutions, including two policy banks. As a result, except for China Development Bank and The Export-Import Bank of China, which were rated as BBB with national sovereignty, the credit status of other 13 financial institutions was speculative (below BBB-). The next day, The Wall Street Journal commented that Standard & Poor's rated all Chinese mainland banks as junk. ?

Among them, China Bank ranked first with (BB+), and Guangdong Development Bank ranked last with CCCpi. Moreover, Standard & Poor's said that among the subsidiaries of CITIC Group, CITIC Industrial Bank can bring rich net profit to the Group. However, in the next few years, as banks need to increase bad debt reserves in accordance with the new regulations of the Ministry of Finance to cope with the losses caused by non-performing loans, it is estimated that the profits of banks will be under pressure.

Moody's, an international authoritative rating agency, made major adjustments to the ratings of China's sovereign and related financial institutions around June 16: Moody's rating outlook for China's financial institutions is "stable", and Moody's believes that "the upper limit of banks' foreign currency deposit rating will be raised from Baa 1 to A2, while the financial strength rating (from D- to E) reflecting the independent credit quality of these banks will remain unchanged. The rating trend of these banks is consistent with the sovereign rating, reflecting the support of the government, regardless of the ownership status of the government, the important policy role of the bank or the size of the bank. " However, Moody's also pointed out that as China's economy is still in transition, its monetary, fiscal, financial and regulatory institutions are relatively weak. Moody's said that China's foreign currency rating will depend on how the China administration can protect the country's strength while deepening reform.

Moody's attaches more importance to China than Standard & Poor's and is more determined to enter the China market. Moody's established China Company in Chinese mainland. Like Fitch, another rating company, Moody's has been trying to explore the China market for several years, during which it has trained many researchers who really know China. However, S&P has focused its long-term strategy on the Americas, because its share in the rating market in the Americas is slightly larger than Moody's. So far, we haven't seen the trend that S&P wants to really explore the China market. There are only two offices in China, and there are no more than 5,000 global analysts in Chinese mainland. Researchers who really study the mainland economy have not been trained.