Page 20 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
financial sector. The NBS said, the government would in the corporate sector to stay at a 9 percent point,” said
“ensure the deepening of supply-side structural reform” Kim Eng Tan, an S&P senior director of sovereign ratings.
and prevent “systemic financial risks” (Wang). “We’ve now come to the conclusion that while we do
expect some deleveraging in the next few years, this
China must continue further attempts to control its deleveraging is likely to be much more gradual than
debt problems. In September 2017, S&P Global Ratings we thought could have been the case early this year.”
cut China’s sovereign credit rating for the first time since Tan told Reuters that broader lending by all financial
1999, citing the risks from soaring debt, and revised its institutions, excluding equity fund-raising, has started
outlook to stable from negative. The sovereign rating to rise after growing by a relatively steady 12-13 percent
was cut by one step, to A+ from AA-. The analysts also in the last few years. “That was the key metric that we
lowered their rating on three foreign banks that primarily look at...and we believe while this growth of aggregate
operate in China, saying HSBC China, Hang Seng China debt financing could come down somewhat over the
and DBS Bank China Ltd. would be unlikely to avoid next few years, it’s not likely to come down very sharply.”
default should the nation default on its sovereign debt. China’s banks extended a record $1.84 trillion of loans
“China’s prolonged period of strong credit growth has in 2016, roughly the size of Italy’s economy. TSF was a
increased its economic and financial risks,” S&P said. record $2.70 trillion. “One of the things that we do look
“Although this credit growth had contributed to strong for is more than just stabilization of financial risks, but
real gross domestic product growth and higher asset actual decline or moderation in financial risks,”Tan said. If
prices, we believe it has also diminished financial stability China’s credit-to-income growth falls sharply in coming
to some extent.” Bloomberg said the downgrade, the years and the economy remains healthy, S&P would
second by a major ratings company in 2017, represents consider a ratings upgrade, he added (Reuters).
ebbing international confidence China can strike a
balance between maintaining economic growth and Chinese Business Climate
cleaning up its financial sector. The timing of the move
was unfortunately only a few weeks before 19th national China first agreed in 2015 to open the credit card
congress meeting. “It’s bad optics for China, especially market to local and foreign businesses, a move triggered
when they’re out there from a policy and rhetorical by a 2012 World Trade Organization ruling. However,
standpoint talking about debt more and acknowledging foreign card companies have been unable to set up
their debt challenge,” said Andrew Polk, co-founder of local operations in the absence of a clear roadmap
research firm Trivium China in Beijing. “It may feel like from Chinese authorities. Finally, U.S.-based payment
potentially the international community is piling on card companies began to submit license requests to
and that will be frustrating.” In May, the ministry refuted operate in China in 2017, but the long wait for the U.S.
the downgrade by Moody’s Investors Service, saying it companies is unlikely to end soon. It may take more than
overestimated China’s economic difficulties. The official two years for the companies to clear all official scrutiny
Xinhua News Agency claimed that the downgrade won’t and banking regulations. China’s lucrative market is
hurt foreign investment and doesn’t reflect the nation’s expected to become the world’s largest bankcard market
economic situation, citing experts. The International by 2020. The expected entry of foreign card companies
Monetary Fund last month increased its estimate for will no doubt challenge the dominance of state-backed
China’s average annual growth rate through 2020, while China UnionPay Co., Ltd., currently the sole operator in
warning that it would come at the cost of rising debt that a yuan bankcard payment network worth more than $8
increases medium-term risks to growth. IMF Managing trillion in China (Chatterjee).
Director Christine Lagarde said in August that leaders are
making critical efforts to rein in risk (Zhao et al.). American companies in China have been collectively
reporting better prospects even as they complain that
While S&P warned earlier in the year that a cut the Chinese authorities are not allowing them enough
was possible, it said it decided to make the call after access to parts of the Chinese market and discriminating
concluding that China’s “de-risking” drive that started against them as they seek to compete against Chinese
early this year was having less of an impact on credit rivals. Trade tensions between Washington and Beijing
growth than initially expected. “Despite the fact that the ran high in 2017, but America businesses still considered
government has shown greater resolve to implement China to be a reliable source of profit growth. These
the deleveraging policy, we continue to see overall credit businesses benefited from a Chinese economy that is
20
financial sector. The NBS said, the government would in the corporate sector to stay at a 9 percent point,” said
“ensure the deepening of supply-side structural reform” Kim Eng Tan, an S&P senior director of sovereign ratings.
and prevent “systemic financial risks” (Wang). “We’ve now come to the conclusion that while we do
expect some deleveraging in the next few years, this
China must continue further attempts to control its deleveraging is likely to be much more gradual than
debt problems. In September 2017, S&P Global Ratings we thought could have been the case early this year.”
cut China’s sovereign credit rating for the first time since Tan told Reuters that broader lending by all financial
1999, citing the risks from soaring debt, and revised its institutions, excluding equity fund-raising, has started
outlook to stable from negative. The sovereign rating to rise after growing by a relatively steady 12-13 percent
was cut by one step, to A+ from AA-. The analysts also in the last few years. “That was the key metric that we
lowered their rating on three foreign banks that primarily look at...and we believe while this growth of aggregate
operate in China, saying HSBC China, Hang Seng China debt financing could come down somewhat over the
and DBS Bank China Ltd. would be unlikely to avoid next few years, it’s not likely to come down very sharply.”
default should the nation default on its sovereign debt. China’s banks extended a record $1.84 trillion of loans
“China’s prolonged period of strong credit growth has in 2016, roughly the size of Italy’s economy. TSF was a
increased its economic and financial risks,” S&P said. record $2.70 trillion. “One of the things that we do look
“Although this credit growth had contributed to strong for is more than just stabilization of financial risks, but
real gross domestic product growth and higher asset actual decline or moderation in financial risks,”Tan said. If
prices, we believe it has also diminished financial stability China’s credit-to-income growth falls sharply in coming
to some extent.” Bloomberg said the downgrade, the years and the economy remains healthy, S&P would
second by a major ratings company in 2017, represents consider a ratings upgrade, he added (Reuters).
ebbing international confidence China can strike a
balance between maintaining economic growth and Chinese Business Climate
cleaning up its financial sector. The timing of the move
was unfortunately only a few weeks before 19th national China first agreed in 2015 to open the credit card
congress meeting. “It’s bad optics for China, especially market to local and foreign businesses, a move triggered
when they’re out there from a policy and rhetorical by a 2012 World Trade Organization ruling. However,
standpoint talking about debt more and acknowledging foreign card companies have been unable to set up
their debt challenge,” said Andrew Polk, co-founder of local operations in the absence of a clear roadmap
research firm Trivium China in Beijing. “It may feel like from Chinese authorities. Finally, U.S.-based payment
potentially the international community is piling on card companies began to submit license requests to
and that will be frustrating.” In May, the ministry refuted operate in China in 2017, but the long wait for the U.S.
the downgrade by Moody’s Investors Service, saying it companies is unlikely to end soon. It may take more than
overestimated China’s economic difficulties. The official two years for the companies to clear all official scrutiny
Xinhua News Agency claimed that the downgrade won’t and banking regulations. China’s lucrative market is
hurt foreign investment and doesn’t reflect the nation’s expected to become the world’s largest bankcard market
economic situation, citing experts. The International by 2020. The expected entry of foreign card companies
Monetary Fund last month increased its estimate for will no doubt challenge the dominance of state-backed
China’s average annual growth rate through 2020, while China UnionPay Co., Ltd., currently the sole operator in
warning that it would come at the cost of rising debt that a yuan bankcard payment network worth more than $8
increases medium-term risks to growth. IMF Managing trillion in China (Chatterjee).
Director Christine Lagarde said in August that leaders are
making critical efforts to rein in risk (Zhao et al.). American companies in China have been collectively
reporting better prospects even as they complain that
While S&P warned earlier in the year that a cut the Chinese authorities are not allowing them enough
was possible, it said it decided to make the call after access to parts of the Chinese market and discriminating
concluding that China’s “de-risking” drive that started against them as they seek to compete against Chinese
early this year was having less of an impact on credit rivals. Trade tensions between Washington and Beijing
growth than initially expected. “Despite the fact that the ran high in 2017, but America businesses still considered
government has shown greater resolve to implement China to be a reliable source of profit growth. These
the deleveraging policy, we continue to see overall credit businesses benefited from a Chinese economy that is
20
