May 30, 2012 / 2:27 PM / 5 years ago

TEXT-S&P: how China's economy would affect corp sectors

May 30 - Given China's role as a major engine of global economic growth, a
hard landing in what is now the world's second-largest economy would reverberate
around the globe but would have varying repercussions in some manufacturing and
technology sectors. In "A Hard Landing In China Could Hurt Ratings In Certain
Global Manufacturing Sectors," published yesterday on RatingsDirect, Standard &
Poor's Ratings Services says it believes three sectors in the U.S., Europe, and
Asia (outside China) are vulnerable to a marked slowdown in Chinese economic
growth: the automotive, capital goods, and technology hardware sectors. 	
	
"We see a fairly slim chance of China's economy suffering a hard landing, but 	
economic expansion is undoubtedly slowing there," said Standard & Poor's 	
credit analyst David Wood. "Real GDP growth there has slowed this year largely 	
because of the government's efforts to curtail inflation, particularly in the 	
real estate sector, where fears of an asset bubble have arisen. In addition, 	
economic weakness globally has stemmed China's export growth," he continued.	
	
Investment-grade issuers in the identified sectors generally have solid credit 	
measures with sufficient headroom under their ratings, so under a hard-landing 	
scenario that lasts for one year, it is unlikely that we would lower any 	
ratings on these issuers. The exception could be a small number of Asian 	
investment-grade issuers in capital goods and technology, which might get 	
one-notch downgrades. However, we could downgrade some speculative-grade U.S., 	
European, and Asian capital goods and technology companies, as well as 	
non-investment-grade Asian auto component companies, by one notch.	
	
The article is part of a special series on RatingsDirect under the heading 	
"The Credit Overhang." Other reports discuss the automotive, capital goods, 	
and technology hardware sectors. 	
	
The reports are available to subscribers of RatingsDirect on the Global Credit 	
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 	
subscriber, you may purchase copies of these reports by calling (1) 	
212-438-7280 or sending an e-mail to research_request@standardandpoors.com. 	
Ratings information can also be found on Standard & Poor's public Web site by 	
using the Ratings search box located in the left column at 	
www.standardandpoors.com.

Our Standards:The Thomson Reuters Trust Principles.
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