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TEXT-S&P on effects of hard landing in China on auto sector
May 30, 2012 / 2:52 PM / 5 years ago

TEXT-S&P on effects of hard landing in China on auto sector

May 30 - With China's dominance in the global economy increasing, any
setback in its domestic economy could reverberate throughout the world. Standard
& Poor's Ratings Services believes three sectors are vulnerable to a hard
landing in China: the automotive, capital goods, and technology hardware
sectors. But the automotive sector seems the least vulnerable of the three from
a credit rating standpoint.	
	
According to "Implications For The Global Automotive Sector Of A Hard Landing 	
In China," published yesterday on RatingsDirect, the automotive sector would 	
face less credit risk than the other two sectors in a hard economic landing of 	
one year or less, despite some companies' significant sales exposure to the 	
world's largest auto market. Ratings on some speculative-grade auto component 	
manufacturers in Asia may be vulnerable, however. If a hard landing lasted two 	
years, some investment-grade and strong speculative-grade companies in the 	
auto, capital goods, and technology hardware sectors could be at risk of a 	
downgrade.	
	
"The increase in auto sales in China has recently slowed dramatically, and we 	
expect this trend to continue because of slowing economic growth, high 	
gasoline prices, and the expiration of government incentives for car buyers," 	
said Standard & Poor's credit analyst Robert Schulz. "However, if China's 	
economic expansion were to slow significantly, we believe auto sales growth 	
would moderate to 3% to 5%, or even stall," he continued.	
	
The article is part of a special series of articles on RatingsDirect under the 	
heading "The Credit Overhang." Other reports discuss the capital goods and 	
technology hardware sectors, and an overview summarizing our conclusions from 	
our research, titled "A Hard Landing In China Could Hurt Ratings In Certain 	
Global Manufacturing Sectors," is also on RatingsDirect.	
	
The report is available to subscribers of RatingsDirect on the Global Credit 	
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 	
subscriber, you may purchase a copy of the report 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.

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