TEXT-S&P says China's credit metrics turn negative

(The following statement was released by the rating agency)

Oct 12 - China has been unable to sustain its growth momentum in the year of the dragon, leading Standard & Poor's economists to lower their growth expectations for the country, according to a Global Fixed Income Research report titled "Emerging Markets Credit Metrics: Rating Trends In China Turn Negative."

"Corporate downgrades have been increasing and the country's negative bias has edged up," said Diane Vazza, Managing Director for Global Fixed Income Research. "However, investors continue to wait for the government to introduce growth-stimulating measures and lead global recovery."

Key highlights from China's credit metrics include:

-- China's real GDP growth rate declined to 7.6% in the second quarter of 2012, from 8.1% in the first quarter. Last month, Standard & Poor's lowered its expectation of China's 2012 GDP growth rate to 7.5% from 8%, citing weak exports and investment growth in the country. Although domestic consumption was the leading factor behind the country's economic growth until 2004, the proportion of investments-to-GDP has been rising during the past decade and this has further increased the importance of government policies in stimulating economic growth. While the government's monetary and fiscal stimulus helped drive growth after the global financial crisis of 2008, the administration has not been as aggressive this time around--as it faces high inflation and a major leadership transition. As a result, China's below-trend growth has dragged.

-- Standard & Poor's coverage of issuer credit ratings in China has increased significantly since 2008, with 73% of the 96 rated corporate entities in the country assigned their first rating in 2008 or later. Standard & Poor's rates about 60% of issuers in China speculative grade ('BB+' and lower) and about 56% in the 'BB/B' rating categories.

The report is available to subscribers of RatingsDirect on the Global Credit Portal at . If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to [e-mail]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at . Members of the media may request a copy of this report by contacting the media representative provided.

(Caryn Trokie, New York Ratings Unit)

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