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Research Announcement:

Moody's - Infrastructure investment a pillar of China’s economic recovery as policy support boosts its growth

 The document has been translated in other languages

28 September 2020

Hong Kong, September 28, 2020 --

  • Investments in transportation projects a key driver as urbanization accelerates
  • Rated issuers' increased infrastructure spending will weigh on their credit quality, but liquidity should remain intact

Moody's Investors Service says in a new report that infrastructure investment in China will lead the economy's recovery from the coronavirus pandemic, aided by government stimulus measures as it continues its growth over the next 2–3 years.

"The Chinese government aims to use infrastructure investment to boost economic growth, and has announced a series of stimulus policies that will support infrastructure projects by reducing finance costs, broadening funding channels and easing fiscal constraints on regional and local governments and state-owned enterprises (SOEs)," says Ivy Poon, a Moody's Vice President and Senior Analyst.

While innovative and green infrastructure investment is a new focus, traditional infrastructure projects, such as on major transportation and water conservancy, will continue to be a key driver of infrastructure spending. And SOEs will remain the dominant source of investment in the medium term, as the weakening economy will temporarily limit the private sector's financial flexibility, but the government will continue to encourage greater private-sector participation.

"Transportation will steer infrastructure development over the next 3–5 years, as urbanization continues and passenger numbers and freight demand increase," says Qingqing Guo, a Moody's Assistant Vice President and Analyst and co-author of the report.

"Investments will be mainly focused on railway infrastructure in China's central and western regions, together with the expansion of high-speed rail, road and metro networks," adds Guo.

Moody's expects this policy-led infrastructure spending will weigh on the credit quality of rated infrastructure issuers. Companies will likely maintain sizeable debt-funded capital spending or further increase their spending, resulting in higher leverage. This will be partially mitigated by a potentially greater recurring fiscal support and extraordinary support from the Chinese government. Overall, Moody's expects most infrastructure companies will maintain sound liquidity and manage refinancing risks well.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Ivy Poon
VP-Senior Analyst
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Qingqing Guo
AVP-Analyst
Project & Infrastructure Finance
MIS Beijing Shanghai Branch
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Releasing Office :
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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