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China in Focus

Global Home > China in Focus

China's Lower Coal Unit Costs Unlikely to Raise Long-Term Prices

China's registered coal-mining capacity had increased 6% to 3.90 billion tonnes by end-2018, according to the National Energy Administration (NEA). This ramp-up, together with 0.66 billion tonnes of expected supply from mines under construction, suggests sufficient qualified capacity to meet domestic demand. China consumed 3.55 billion tonnes of coal in 2018.

PPP Accounting Understates Risks in Chinese E&C Companies

Active participation in PPP investments requires substantial debt funding and increases the liquidity risks of some of these companies, but their reported debt and cash flow accounts may not fairly reflect the associated risks due to their accounting choices.

 

Related Press Releases and Reports:
Unpacking Chinese Engineering and Construction Firms' PPP Investments
China's PPP Rules to Cool Infrastructure Investment
PPP Counterparty Risks in the Spotlight

rating action

Fitch Places Kunming Iron & Steel on Rating Watch Negative

The RWN reflects a review of Fitch's internal assessment of the creditworthiness of the Yunnan province, which was prompted by a revision in the criteria that govern the ratings of international local and regional governments. Linkage between KISC and the Yunnan government remains unchanged.

China's New Residency Policy Negative for Private Schools

On 8 April 2019, the National Development and Reform Commission granted urban residency rights to all migrant workers in cities with fewer than 3 million permanent residents and relaxed hukou restrictions in cities that have 3 million-5 million permanent residents.

China's Hukou Policy Change Stabilises Housing Demand in Mid-Sized Cities

The new policy reduces the risks of a sharp downturn in the nationwide housing market in the near to medium term. Fitch had forecast in November 2018 that nationwide housing sales value may drop by up to 10% in 2019, driven primarily by a decline in lower-tier city sales.

China's EV Market to Sustain Rapid Growth Despite Subsidy Cuts

The Chinese government's recent sharp cuts to electric vehicle (EV) subsidies are unlikely to disrupt fast volume growth. We expect demand in the world's largest EV market to be supported by increasingly attractive product offerings, as well as wider commercial use of passenger EVs, in addition to a potential "pull-forward" effect in 2Q19.

Fitch + CRU

China's Growing Thermal Coal Supply to Pressure Exporters

Growing Chinese thermal coal supply is likely to lead to further tightening of import controls by the government, putting pressure on seaborne coal prices and adding order uncertainties for exporters. Miners from Australian and Indonesia are the most exposed, but the credit impact is muted thanks to sufficient rating headroom as we have already incorporated a downward pricing trend in our rating assumptions. 

Chinese NOCs' Strong Buffers Support Higher Capex, Lower Prices

The three NOCs benefitted from stronger prices and yoy EBITDA growth in 2018. Average Brent and National Balancing Point (NBP) prices rose 34% and 38% yoy, respectively, to USD72.5/barrel and USD8.3/thousand cubic feet, resulting in stronger realised oil prices for upstream activities among the companies. 

Chinese Gas Operators Face Some Dollar-Margin Pressure

Rated Chinese gas operators' 2018 financial results are largely in line with Fitch Ratings' forecasts, including strong growth in gas sales and a small decline in gas sales dollar margin. Fitch expects dollar margins to further trend down due to difficulties in raising gas retail price for certain users, but this may be mitigated by operators' efforts to lower gas procurement cost.

Tighter Regulation Challenges Chinese Peer-to-Peer Business Models

Fitch Ratings expects China’s peer-to-peer (P2P) lending industry continues to shrink and suggests watching out the impacts on business models, asset quality, liquidity and funding.

 

Related Press Release and Materials:
China's Peer-to-Peer Lending Shrinks as Regulation Tightens
Dashboard
Tighter Regulation Challenges Chinese Peer-to-Peer Business Models (English video)
监管趋严使中国的P2P业务模式面临挑战 (中文视频)

China's Peer-to-Peer Lending Shrinks as Regulation Tightens

China's peer-to-peer lending industry will continue to shrink and consolidate as tighter regulation and weak investor sentiment drive out operators conducting the riskiest activities.

 

Related Materials:
Dashboard
Tighter Regulation Challenges Chinese Peer-to-Peer Business Models (English video)
监管趋严使中国的P2P业务模式面临挑战 (中文视频)

Fitch on China Newsletter (April)

The temporary grounding of Boeing 737 MAX around the world has limited impact on Chinese lessors' standalone credit profile given their low level of exposure to this aircraft. The lessors' Issuer Default Ratings (IDRs) remain intact and continue to be underpinned by our view of an extremely high probability of support from their parent banks.

Previous editions:

Fitch Ratings Voted Best Agency for Chinese USD Bonds in 3 Categories

Fitch Ratings has been voted the "Outstanding Rating Agency for Chinese Companies' USD Bonds" in three categories by users of Wall Street Trader, a financial web application widely used by participants in China's debt capital markets. 

Fitch Ratings wins Best International Ratings Agency Award

Fitch Ratings has been named the Best International Ratings Agency in the FinanceAsia China Awards 2018.

Fitch Wins Its First Credit Rating Agency Award in China

Fitch Ratings has been voted the "Outstanding Rating Agency for Chinese Companies' Offshore Fixed Income Market" by users of Wall Street Trader, a financial web application that is widely followed and utilised by participants in China's debt capital markets.

Fitch Ratings Launches China Local Ratings Agency with Danny Chen as CEO

Fitch Ratings announced the launch of Fitch (China) Bohua Credit Ratings Ltd. (Fitch Bohua) which plans to serve China's onshore bond market, and has appointed Danny Chen as Fitch Bohua's chief executive officer. Set up in July 2018 in Beijing, Fitch Bohua is a 100% subsidiary of Fitch Ratings. The company is seeking regulatory approval to cover the financial institutions sector (including banks, non-bank financial institutions and insurers) as well as the structured finance sector in its initial phase of operations.

Contacts

Andrew Fennell

Sovereigns

Andrew Fennell

Analytical

+852 22639925

Grace Wu

Banks

Grace Wu

Analytical

+852 2263 9919

Jonathan Lee

NON-BANK FINANCIAL INSTITUTIONS

Jonathan Lee

Analytical

+886 2 8175 7601

Ying Wang

Corporates

Ying Wang

Analytical

+86 21 6898 7980

Jeffrey Liew

Insurance

Jeffrey Liew

Analytical

+852 2263 9939

Terry Gao

International Public Finance

Terry Gao

Analytical

+852 2263 9972

Hilary Tan

Structured Finance

Hilary Tan

Analytical

+852 2263 9904

Henry Hung

Greater China

Henry Hung

Business

+86 21 6898 7988

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