May 30 - Capital goods sectors in the U.S., Europe, and Asia are among the industries most vulnerable to a hard landing for China's economy this year, Standard & Poor's Ratings Services said today in an article titled "The Credit Overhang: A Hard Landing In China Could Materially Pressure Capital Goods," published on RatingDirect. Standard & Poor's has used three possible economic growth scenarios for China in 2012. We believe our base-case "soft landing" and our medium case--economic growth slowing to 8% and 7%, respectively--would generally have little to no rating impact on capital goods companies in the U.S., Europe, and Asia. But our "hard landing" scenario of 5% growth could lead to some downgrades, especially among speculative-grade companies. "Factors that underpin our hard landing scenario include government policies aimed at cooling the housing market and curbing inflation, which could slow the economy faster than we expect," said Standard & Poor's credit analyst Gregoire Buet. The recession in many European economies and slow growth in the U.S. could also exacerbate weakening domestic growth. Another risk could be a delay in China's goal of shifting the economy from a dependency on investments and exports to a more balanced growth model that emphasizes domestic consumer consumption, if the shift takes effect more slowly than the government anticipates. "If China's economic expansion were to slow significantly to 5%, as in our hard landing scenario, we believe sales growth for foreign companies in the capital goods sector could be flat to in the low single digits," Mr. Buet said. "The hard landing scenario could likely affect ratings of some speculative-grade issuers in the U.S., Europe, and Asia (outside China)," he added. A significant economic slowdown in China, to a hard landing of 5% growth this year, could lead to some one-notch downgrades of speculative-grade companies. Standard & Poor's could take negative rating actions on both investment- and speculative-grade issuers if a hard landing stretches from 2012 into 2013 or causes economic growth to slow materially in markets outside of China. 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 firstname.lastname@example.org. 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.