The Chinese retail sector is facing weak but improving credit conditions, while most other non-financial corporates in a variety of sectors are experiencing stable conditions, according to a new Moody’s Investors Service report.
"A challenging operating environment and merger and acquisition activity have pressured the credit profiles of Chinese retail companies, but revenue and margins are stabilizing thanks to improved product and service offerings and upgraded shopping environments," said Lina Choi, a Moody's vice president and senior credit officer.
Chinese internet and technology companies are expected to see slow, stable revenue growth this year boosted by consumer demand and increased monetization, analysts said. Meanwhile, the automakers and auto services companies will also experience slow and steady growth, thanks to reduced vehicle purchase tax incentives.
Utilities companies are expected to stay stable this year thanks to the current regulatory framework.
Domestic and overseas infrastructure investment, in addition to a large order backlog for existing property projects, should increase the revenue growth of Chinese construction and engineering firms this year, Moody’s said. “The credit profiles of rated developers should improve in 2017, despite slowing sales growth from tighter government controls,” Moody’s analysts said. “The major developers will continue to increase their market share, supported by their strong branding and execution abilities, solid financial profiles and continued access to funding.”
– Nicholas Stern, senior editor