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Chinese Government Credit Rating: Helping Improve China’s Finances

Noted rating agencies, such as Standard & Poor’s, Fitch Ratings, and Moody’s, Investors Service have an optimistic outlook on China. In 1998, Moody’s gave a Chinese government credit rating of A3, which covers the foreign currency debt of the Chinese government. Despite numerous problems in China’s economic development policy, there have been many indications that the government is taking measures to improve the country’s financial sector and economic programs. This is a major reason why the credit rating agencies maintain their positive outlook on the country’s economic prospects.

In fact, Standard & Poor’s upgraded the Chinese government’s sovereign credit rating to A- from its previous rating of BBB+ in July 2005. This upgrade mirrors the optimistic views of the other agencies regarding the Chinese government’s creditworthiness. Moody’s Investors Service has given an improved rating of A2, while Fitch Ratings has awarded the Chinese government an A- rating. So many events and policies have reassured these agencies about the sincere desire of China to improve economic programs and reduce the likelihood that they will not be able to make payments on foreign loans.

For one thing, improvements have been made in how state-owned enterprises are structured and run. Another thing is the continued reforms in the banking sector, such as the recapitalization of China’s biggest bank, the Industrial and Commercial Bank of China. The changes made concerning these enterprises and the financial industry in general are projected to facilitate the movements of China’s economic development and economic cycle and to make the country an attractive investment option.

To be sure, China has a multitude of economic and social problems, but then, what country doesn’t? But with the higher Chinese government credit rating given by agencies like S&P, Fitch’s, and Moody’s, China has an even better prospect of joining the list of the world’s top economies and perhaps be better able to improve the social and economic situation at home.