Top Biz News
L-shaped recovery is likely
(China Daily)
Updated: 2009-09-28 08:59
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 Richard Burton |
Editor's Note: Coface, an international credit insurance and credit management services group, in February downgraded its ratings for 22 countries and territories, while putting the two biggest emerging markets - China and Russia - on its negative watch list of A-3 ratings for the first time.
However, with the more positive economic outlook for China, Coface has since kept China's country rating unchanged, despite almost all other countries having had one or two downgrades since the beginning of the global financial crisis.
The adoption of measures to stimulate the economy and the first half-year's positive signals (an increase in credit and a return to positive territory of Purchasing Managers' Index (PMI),) led Coface to maintain the rating, Richard Burton, regional managing director for Coface Greater China, told China Business Weekly reporter Si Tingting.
Coface entered the China market in 2001, setting up Coface (Shanghai) Information Services Co Ltd in Shanghai to provide credit management services for local companies.
In 2003, Coface partnered with Ping An Insurance to offer domestic short-term trade credit insurance to help Chinese enterprises and foreign investment companies mitigate credit risks in domestic trade in China - the first such service in the country.
Burton believes that China has made great advances in regulations and opening its markets since becoming a member of the World Trade Organization. But the current crisis has highlighted certain weaknesses such as an over-reliance on exports and lower value-added manufacturing that are now being addressed.
Q: Coface once estimated that the credit crisis triggered by the global financial crisis might see the bottom by the end of 2009. What is your latest observation on the credit crisis? Coface also once said that among Asia's emerging countries, China might be the first to show signs of recovery. Why?
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An inclined L-shaped recovery rests on three types of positive signals. First, some real economy indicators are improving such as retail sales, property and job losses in the United States, and industrial production in some European markets.
Plus, anticipation surveys of investors and consumers are pointing up. Third, financial players are showing a renewed appetite for risk. Our inclined L-shaped scenario is nonetheless dependent on confidence, which is still weak.
Coface projects the 2009 recession at -2.5 percent and sees growth recovering in 2010, settling at 1.7 percent. After having downgraded 22 countries in January and then 47 in April, Coface downgraded 13 country ratings again in July, primarily for small or medium-size economies highly dependent on international trade.
Since the beginning of the crisis, most countries have been implementing measures and stimulus packages to prevent this from worsening. From the latest economic indicators, it can be seen that the contraction has been slowing down.
China has been able to withstand the current downturn with its large reserves through announcing a large fiscal stimulus plan and the loosening of its monetary policy. Compared with other Asian economies, China's growth performance is relatively strong.
