CHINA'S development drive yesterday received a setback following the downgrading of the international credit rating of its four biggest banks.
Moody's Investor Service, a United States rating company which announced the regrading at the end of a seven-month investigation, also warned that the China International Trust and Investment Corporation (CITIC), the mainland's flagship investment company, was under review.
Chinese monetary authorities criticised the move which will make the cost of borrowing money from international institutions more expensive. The US rating company lowered to Baa1 from A3 the long-term bond ratings of the Bank of China, Bank of Communications, People's Construction Bank of China and Industrial and Commercial Bank of China.
These banks combined make up half of the country's financial industry with combined assets of about US$641 billion (HK$4,950 billion).
They have been the financial powerhouse behind development programmes ranging from agriculture to commercial credit.
Last year alone Bank of China, a major conduit for offshore capital-raising, borrowed 15 billion yen, a total of US$500 million through two deals, and 300 million marks.
Moody's will review the A3 rating of CITIC, the state-run investment conglomerate, and downgraded the long-term rating of Guangdong International Trust and Investment Corporation, a regional state-owned conglomerate, to Baa2 from A3. Moody's said the downgradings result from the Government's plans to transform state banks from development institutions into commercial operations.