Mainland companies use their cash flow to cut debt but their earnings growth may slow, says Standard & Poor's
Corporate China is cashed up and able to weather higher interest rates, according to a leading credit rating agency.
Mainland firms have used strong cash flows to reduce debt and, in the case of recent public listing candidates, bolstered balance sheets with market proceeds, a report from Standard & Poor's Rating Services concludes.
Economic slowdown triggered by higher interest rates typically hurts an over-expanded corporate sector, but a snapshot of the mainland's leading companies indicates that the latest cycle has produced unusual caution.
Last Friday, the central bank raised benchmark lending and deposit rates by 0.27 percentage points to 5.58 per cent and 2.25 per cent, representing an escalation of Beijing's cooling measures to slow runaway economic growth.
'The interest rate increase is symbolic at this stage. Companies can easily survive this,' said credit analyst and director John Bailey at Standard & Poor's in a teleconference yesterday. 'Many of the companies we surveyed have a net cash position. Their leverage in general is quite low.'