Mainland issue gets thumbs up

THE outlook on the US$400 million of newly issued Yankee bonds from China is positive, Standard & Poor's says.

It said yesterday China's credit-worthiness was supported by its 'considerable external financial flexibility and the prospects for continued rapid economic development as wide-ranging economic reforms are cautiously but steadily implemented'.

Firm credit and investment policies since mid-1993 were reinforcing economic and social stability by lowering inflation and slowing unsustainable output growth.

China this week locked in $100 million in 100-year funding and a further $300 million in seven-year funding through separate Yankee bonds.

China's ability to introduce economic reforms while avoiding disruptive political developments would strengthen medium-term prospects for managing rapid economic growth and maintaining social stability, the agency said.

Fundamental reform affecting external trade and exchange systems, monetary policy, the financial sector and investment management, fiscal structure and policy and state enterprises, was making important progress, it said.

It warned that the problems of the state enterprises, the specialised banks and monetary and fiscal control were deep-seated, but failure to advance these and other reforms would leave China exposed to 'disruptive episodes of growth, inflation and external payments deficits'.