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Fitch Affirms China Great Wall at 'A'; Outlook Stable
October 17, 2017 / 9:08 AM / 2 months ago

Fitch Affirms China Great Wall at 'A'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG, October 17 (Fitch) Fitch Ratings has affirmed China Great Wall Asset Management Co., Ltd.'s (China Great Wall) Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'A' with a Stable Outlook. A full list of rating actions is at the end of this rating action commentary. The ratings on China Great Wall are credit-linked with those of the Chinese sovereign (A+/Stable), and notched down once. The rating reflects China Great Wall's state ownership and strong control by the authorities. Its strategic ties with the state mean there is a strong likelihood the company would receive extraordinary support from the sovereign, if needed. KEY RATING DRIVERS Sovereign Ownership: China Great Wall is a state-owned non-bank financial institution under China's company law. The Ministry of Finance (MoF) owns 97% of China Great Wall and directly controls China Great Wall. The National Social Security Fund (NSSF) and China Life Insurance (Group) Company hold the remaining stake in the company after taking up shares as part of a shareholder reform in 2016. China Great Wall plans to hold an IPO in the next two to three years, following in the footsteps of other state-owned asset management companies (AMCs) in China. Fitch expects the MOF to maintain a controlling stake in China Great Wall even after the shareholder reform and plan for an IPO. Fitch believes the loss of state control over the company would pose a risk to China's financial system, given the company is critical to resolving distressed debt in the country. Its legal status attribute is assessed at Mid-Range. Stronger Strategic Importance to China: Fitch believes the difference between China's four-largest AMCs is insignificant; they are highly necessary to absorb distressed debt, and are instruments that the state uses to reduce systemic risk and maintain confidence in the banking sector. We believe the government is highly likely to provide strong support to the AMCs to ensure financial-market stability. We do not expect the rapid, organic expansion of China Great Wall's non-policy business to dilute its strategic importance to the state as long as it remains a key player in its core business. No Dilution of Core Activities: China Great Wall's non-performing assets business represented around 50% of the group total assets at end-2016, similar to the level a year earlier. China Great Wall places highest priority on the Traditional Distressed-Asset Management business, which deals with non-performing loans (NPLs) from Chinese commercial banks. China Great Wall intends to strengthen its core business in the coming years to better fulfil its mandate to deal with NPLs from China's banking system. Subject to CBRC Supervision: China Great Wall, which was set up in 1999, is subject to the regulation and supervision of the China Banking Regulatory Commission (CBRC). Its senior management is scrutinised and appointed by CBRC, which also has significant influence over the entity's operations through industry- and business-activity supervision. Its control and oversight attribute is assessed at Stronger. Mid-Range Integration: The size of China Great Wall's balance sheet is relatively small compared with China's budget, and the company does not receive ongoing subsidies or capital injections from the government. Its financial liability accounted for less than 1% of China's GDP at end-2016. We assess the company's integration with the state budget at Mid-Range. Sufficient Capital-Adequacy Controls: Fitch believes China Great Wall has prudent risk controls and sufficient capital-adequacy controls. Fitch expects China Great Wall's capital adequacy ratio to increase further after the planned public listing. RATING SENSITIVITIES Sovereign Rating: Positive or negative rating action on the sovereign rating could prompt similar changes to that of China Great Wall. Stronger explicit support from the sovereign could cause the ratings to be aligned with that of China. Strategic Importance to State: Any significant dilution in China Great Wall's core activities in the acquisition and management of non-performing assets could cause the company's rating to be notched down further from that of the sovereign. This could also happen if significant changes in its strategic importance to the state were to occur, or if the state loses its controlling stake in the company and results in the company no longer classified as being credit-linked to the state. The full list of rating actions is as follows: China Great Wall Asset Management Co., Ltd. Long-Term Foreign-Currency IDR affirmed at 'A'; Outlook Stable Long-Term Local-Currency IDR affirmed at 'A'; Outlook Stable China Great Wall International Holdings III Limited USD800 million 2.625% senior unsecured notes due October 2021 affirmed at 'A' USD700 million 2.25% senior unsecured notes due October 2019 affirmed at 'A' USD500 million 2.75% senior unsecured notes due August 2020 affirmed at 'A' USD500 million 3.875% senior unsecured notes August 2027 affirmed at 'A' USD1 billion 3.125% senior unsecured notes due August 2022 affirmed at 'A' USD6.5 billion medium-term note programme affirmed at 'A' Contact: Primary Analyst Lorraine Liu Associate Director Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Terry Gao Senior Director +852 2263 9972 Committee Chairperson Christophe Parisot Managing Director +33 144299134 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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