China Gets Rating Boost

Good credit rating news from China gives a boost to LatAm bulls who see trade linkages with Asia – particularly commodity demand – supporting the region through a downturn in the US and Europe. S&P raised China to A+ (stable) from A, motivated by an improving fiscal and external position. “These improvements to the government balance sheet will offer greater resilience to deal with the shocks of a potential sharp economic downturn,” says S&P analyst Kim Eng Tan. The agency also notes China’s strong external asset position, exceptional economic growth potential, and continuing improvement to the government’s financial position. Risks include balance sheet damage in an abrupt and prolonged economic slowdown arising from banking sector distress, exacerbated by policymakers’ reliance on administrative tools for macroeconomic management.