Recruiting in China

Moody's lifts China's ratings a notch, citing strong external-payments position
By Polya Lesova, MarketWatch
Last Update: 11:35 AM ET Jul 26, 2007

NEW YORK (MarketWatch) -- Standard & Poor's raised its outlook on China to positive from stable, citing the country's reforms in bankruptcy, property, and labor laws this year.

"These reforms should underpin a high-single-digit trend rate of growth in China and at the same time improve the productivity of investment, thereby reducing the risks of unduly large fluctuations in growth," S&P credit analyst Kim Eng Tan said in a statement Thursday.

S&P doesn't expect any material disruptions between China and the U.S., its largest trading partner, despite rising protectionist attitudes in Congress. S&P affirmed its A long-term and A-1 short-term sovereign credit ratings on China.

"The ratings on China could rise if its leadership embraces market-based policies more readily, or if the government strengthened public finances further," Tan said.

The ratings-outlook revision by S&P comes after Moody's upgraded China's long-term foreign-currency bonds to A1 from A2 Thursday. Moody's cited the exceptional strength of China's external-payments position, favorable government debt trends, and continued progress in economic reform.

"China's very strong external-payments position provides insulation from external shocks and allows the authorities time to expand and deepen structural reform," Moody's Senior Vice President Tom Byrne said in a statement.

"Official foreign-exchange reserves continue to grow and now exceed $1.3 trillion, and external obligations of the government and state-owned banks are a small fraction of that sum," Byrne said.

China's Shanghai Composite index rose 0.5% to a record finish of 4,346.46 Thursday. The Dow Jones China 88 index, a measure of 88 highly liquid stocks listed in Shanghai and Shenzhen, rose 0.6% to 374.62. See Asia Markets.