Many factors support fundamentals despite concerns about slowdown

Operations of China's businesses will remain fundamentally strong next year in spite of a possible moderate slowdown in economic growth, experts said.

Factors supporting business fundamentals include effective control of COVID-19 in China, constant improvement of the nation's dual-circulation growth structure, and continuous advancement of its policies promoting common prosperity and "dual carbon" goals, which refer to the aim of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060, said a report recently published by S&P Global, a leading provider of credit ratings, benchmarks and analytics in the global capital and commodity markets.

The credit status of a majority of financial institutions and industrial and commercial enterprises will remain stable, it said.

In particular, the credit status of leading companies in different sectors will remain good as long as the companies continuously maintain their advantages in technology, capital, profitability and the refinancing channel, S&P Global said.

The firm also forecast that China's monetary policy will remain neutral, based on the tone set by the central authorities for cross-cyclical adjustments of macro policies. It added such a policy will help companies maintain stable financing costs.

Cross-cyclical measures focus more on long-term and sustainable growth with long-term solutions to tackle the root cause while a countercyclical policy focuses more on short term remedies such as adding stimulus when the economy slows down.

"As difficulties to maintain stable economic operations are increasing and policymakers endeavor to achieve the goal of stabilizing growth, we estimate that the central bank will ensure reasonable growth of broad monetary supply and total social financing, and the nation's monetary policy will remain prudent," S&P Global said in the report.

"At the same time, the banking sector will improve its capabilities of serving the real economy while preventing and mitigating financial risks by issuing capital replenishment instruments, as well as receiving funds through the issuance of special-purpose local government bonds or the capital increase of shareholders."

As China's latest macroeconomic policies emphasize the real economy, greater support in terms of direct and indirect financing is likely for enterprises and projects involved in green development related to the "dual carbon" goals, rural revitalization and technological innovation, the report stated.

The annual Central Economic Work Conference held in Beijing from Dec 8 to 10 highlighted that stabilizing growth will be the main theme of China's economic work next year.

The country's fiscal policy is expected to become more proactive and its monetary policy will focus on giving strong support to the real economy, especially in the areas of small and micro enterprises, technological innovation and green lending, said Xiong Yi, China chief economist at Deutsche Bank.

Xiong said policies favoring industries make him optimistic about the prospects of the renewable energy, innovative high-end manufacturing and internet sectors.

The conference said China's monetary policy should guide financial institutions to step up support for the real economy. In recent years, the People's Bank of China, the nation's central bank, has strengthened financial support for small and micro enterprises.

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