S&P 6 August 2013

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August 6, 2013
Asia-Pacific credit conditions have weakened slightly as a result of softer economic traction and increased downside risk in China. Please join us on Wednesday, August 7, 2013, at 11:00 a.m. Eastern Time for an interactive, live Webcast and Q&A. We will discuss our views on the key risk factor for the region: a continued decline in economic activity in China. >>Register for the complimentary Webcast here. This presentation is part of our global Webcast series on sovereign credit trends. The monthly Webcasts feature senior analysts from Standard & Poor's Sovereign Ratings team and are usually held on the first Wednesday of the month. This month's speaker is: KimEng Tan Senior Director Sovereign Ratings Standard & Poor's Ratings Services Moderated by: John Chambers Chairman of the Sovereign Rating Committee Standard & Poor's Ratings Services Please feel free to forward this invitation to your colleagues and customers. A replay will be sent to all registrants.
TOP STORIES Fast Growth Of Shadow Banking May Hasten China's Monetary Reform Chinese banks may gain pricing freedom a little earlier than they perhaps would like. And it's partly their doing. They facilitated the rapid growth of "shadow banking," or credit creation outside the regular banking system. These activities may finally lead the central bank to adopt a monetary framework that works through market-based interest rates. That's long been a goal for many of its most senior officials. The Credit Cloud: China And Asia-Pacific's Great Wall Of Debt Will Tower Over North America And Europe's A great wall of corporate debt is rising in the Asia-Pacific. Standard & Poor's Ratings Services forecasts that Asia-Pacific's nonfinancial corporates will chalk up about half the world's debt of up to US$53 trillion in new and refinancing of corporate loans and bonds over the next five years. China alone will represent about one-third of global demand. Indeed, funds raised by Asia-Pacific's corporates could push the region's outstanding debt to levels that tower over the combined debt in the major Western economies of the U.S., Canada, eurozone (European Economic and Monetary Union), and U.K. as soon as 2017. Do We Know When China Pays The Bills For Its Stimulus? They cannot stay low for long. That's what many external observers believe about reported nonperforming loans (NPLs) in China. A surge in bank lending had helped China ward off a recession in 2009, but it also raised credit risks on banks' loan books. The bill for the economic stimulus has to be paid at some point. And, so the argument goes, when that time comes, NPLs must increase sharply and the government's debt burden will rise as it absorbs some of the cost of these bad loans. No Major Default So Far; So Are Chinese Local Government Debts Now Safer? China's high local and regional governments (LRGs) debt has worried many external observers in recent years. In a 2011 report, the National Audit Office (NAO) stated that Chinese renminbi (RMB) 4.5 trillion of LRG debt would mature over 2011-2012. This included debt incurred through LRG-related companies known as financing platforms (LGFPs). Yet these two years saw no disruptive credit event related to LRGs and LGFPs despite weaker LRG revenue collection last year. Standard & Poor's Ratings Services attributes this largely to the willingness of many creditors to finance LRGs/LGFPs even when they have already incurred sizable debt. China Has Plenty Of Powder Left In Its Stimulus Keg All rounds spent. That's the view of some observers on the relatively modest Chinese policy response to decelerating global economic growth and heightened uncertainties, compared with 2008. They argue that the damage of the last round of economic stimuli had saturated the banks with credit risk and exhausted local governments' ability to finance large projects. Standard & Poor's Ratings Services thinks this is unlikely. Nevertheless, China's previous economic stimuli could have limited policymakers' flexibility in warding off the impact of a near-term global recession. Multimedia Asia-Pacific's Great Wall Of Debt Terry Chan Director, Standard & Poor's Ratings Services Standard & Poor’s predicts that Asia-Pacific’s nonfinancial corporations may represent half of the world's corporate debt load within the next five years. In this CreditMatters TV segment, Director Terry Chan discusses the growing wall of debt in China and other parts of the Asia-Pacific region. Could An End To Quantitative Easing III Affect Standard & Poor’s Earnings Outlook For U.S. Banks? Rodrigo Quintanilla Managing Director, Standard & Poor's Ratings Services In 2008, the Federal Reserve implemented its quantitative easing program to lower interest rates. If asset purchases slow or end this year, interest rates would likely rise. Would Standard & Poor’s earnings outlook for U.S. banks in 2013 change if a pullback is implemented? In this CreditMatters TV video, Managing Director Rodrigo Quintanilla explains the potential outcomes. China Has To Fend Off Rising Non-performing Loans After Keeping Recession At Bay Kim Eng Tan Senior Director, Standard & Poor's Ratings Services Many external observers believe that reported nonperforming loans (NPLs) in China cannot stay low for long. In this CreditMatters TV segment, Senior Director Kim Eng Tan explains why NPLs in China may not increase sharply in the future despite the greater credit risks that banks have taken on since the last global recession. Are Chinese Local Government Debts Safer Than Previously Thought? Kim Eng Tan Senior Director, Standard & Poor's Ratings Services The high debt of China’s regional governments has worried external observers in the past few years. In this CreditMatters TV segment, Senior Director Kim Eng Tan discusses why there hasn’t been a major default by the highly-leveraged financing companies owned by these governments, and whether this benign trend will continue. We also discuss whether these concerns are justified. Can China Afford Another Big Stimulus? Kim Eng Tan Senior Director, Standard & Poor's Ratings Services The Chinese economy is slowing and faces external uncertainties. Unlike in 2008, China has not introduced a major stimulus program. In this CreditMatters TV segment, Standard & Poor's Senior Director Kim Eng Tan explains that China has the capacity to introduce another stimulus program, why it has not yet done so, and what could cause policymakers to change their minds.	Events Upcoming Webcast: Increased China Downside Risk Dampens Asia's Growth August 7, 2013 Webcast Replay: Sovereign Credit Trends: Brazil July 3, 2013 Webcast Replay: Sovereign Credit Trends: India June 4, 2013 Webcast Replay: Sovereign Credit Trends: Latin America May 9, 2013 Stay In Touch Understanding Ratings Podcasts CreditMatters TV Ratings E-Newsletters CM eReports Webcasts & Events Mobile RSS Feed Your Feedback Website Twitter YouTube LinkedIn