Experts: Bank rating downgrades unjustified

China's State-owned banks have been operating very stably with good capital conditions, low nonperforming loan ratios and manageable risk exposure, so it is inappropriate for Moody's to downgrade ratings on eight major Chinese lenders, experts said.

Their comments came as the US-based ratings agency on Wednesday changed to negative from stable its outlook on the banks, following the agency's affirmation of the government of China's issuer rating at A1 and changing the sovereign ratings outlook to negative from stable on Tuesday.

Fellow US-based agencies S&P Global Ratings and Fitch Ratings both confirmed with China Daily that they have made no changes to their ratings for China's major banks.

"Major Chinese banks are global leaders in the banking industry, underpinned by their excellent performance ranging from high capital adequacy ratios to low nonperforming loan levels," said Zeng Gang, deputy director of the National Finance and Development Laboratory.

"In addition, in the past few years, they have been accelerating risk management. They are the ballast stone of China's financial stability, coping well with external situations to fend off risks," Zeng said, adding that questioning their stability is groundless.

Banks involved include three policy lenders — Agricultural Development Bank of China, China Development Bank and Export-Import Bank of China. The rest are commercial lenders including Agricultural Bank of China and Bank of China.

"The robustness of those banks is underpinned by a vast domestic market, improving internal control systems and the broad public trust they enjoy," said Yang Haiping, a researcher at the Central University of Finance and Economics' Institute of Securities and Futures.

"China is reforming its financial regulatory system, strengthening financial supervision and optimizing the coordination of micro-level regulation with macro-prudential management. All these efforts will reinforce the stability of China's banking sector."

Moody's said that the ratings revision is primarily driven by the change in outlook to negative from stable on China's government credit ratings. Experts said the cutting of China's credit outlook is unwarranted and flawed by nature, and so is the ratings cut on the banks.

"China has ample room to expand fiscal and monetary policies to stimulate demand and hedge against the property downturn, to help GDP grow at around 5 percent next year," said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

"In addition, the Chinese economy is transforming from investment-driven and export-led to consumption-driven. A huge domestic market in combination with deepening reforms will ensure great growth potential in the future."

"The ratings cuts are not in line with either China's growth potential or its capability to manage risks," said Feng Qiaobin, deputy director of macroeconomic research at the Development Research Center of the State Council.

Contact the writers at liuzhihua@chinadaily.com.cn