China's top companies will see a slowdown in breakneck growth over the next 18 months, under pressure from the US economy and concerns over the "made in China" tag, Standard & Poor's said yesterday.
The international ratings agency said in a report that leading Chinese companies were currently enjoying strong growth, with earnings of the top 200 firms climbing 23.3 percent last year.
But they had to be aware of potential risks, including negative real interest rates, inflation and excessive debt-fueled expansion, which was putting their credit rating at risk.
The firms also had to be aware of a potential slowdown in the US economy, increasing protectionism hitting exporters and scrutiny of the "made in China" label, which has been damaged in a series of food scandals and product recalls.
"The Chinese economy looks immune to any negative development or threats from the rest of the world at this time," S&P credit analyst Ryan Tsang (
"But the markets could be lulled into underestimating and under-pricing risks during long periods of strong growth and high earnings," he said.
Ping Chew (周彬), managing director of corporate and government ratings in Asia, said the extent of economic slowdown will become clearer in the second half of this year following the introduction of monetary measures aimed at cooling the economy.
"We believe China's policymakers have abundant strategies to deal with the slowdown," he told reporters.
He also believes China will focus more on domestic consumption, which will become a more important economic driver in future.
S&P's report shows telecommunications and oil companies have continued to dominate China's list of biggest companies, with China Petroleum and Chemical Corp (中國石油化工), PetroChina Co (中國石油天然氣) and China Mobile Ltd (中國移動通信) the three largest.
S&P yesterday also affirmed its top AAA long-term corporate credit rating with a stable outlook for Singapore's state-linked investment firm Temasek Holdings Pte.
Temasek controls some of Asia's best-known companies including Singapore Airlines Ltd, Chartered Semiconductor Manufacturing Ltd, Neptune Orient Lines Ltd, port operator PSA International and Singapore Telecommunications Ltd.
It is one of two vehicles used by Singapore to invest its massive savings globally, and has stakes in Indonesia's PT Indosat, DBS Group Holdings, PT Bank Danamon Indonesia, as well as other firms.
"Most of the major investments and Temasek-linked companies have very strong market positions," S&P credit analyst Anshukant Taneja said.
"These entities are expected to continue to generate steady and sustainable cash flows for the group, despite intensifying competition in their operating segments," Taneja said.
S&P said Temasek maintains a very conservative capital structure and strong liquidity at the holding company level.
It has low net debt of less than S$1 billion (US$659 million), the agency said.
"In our view, the company has substantial capacity to raise additional debt," Taneja said. "We also expect Temasek to maintain strict financial discipline and significant liquidity on its balance sheet as it executes its growth strategy."
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