It is still unclear whether China will accelerate its economic rebalancing following its Communist Party Congress, but growth in the economy's leverage is set to slow as rising earnings boost the credit profiles of the country's nonfinancial companies, Moody's said.
"Following the 19th Party Congress, the consolidation of power around President Xi and at the central government level could increase the alignment of incentives between the central leadership and other officials, and thus could advance the process of economic reform and rebalancing," said Michael Taylor, a Moody's managing director.
But he added: "It currently remains unclear whether the increased centralization of authority will result in an acceleration of the pace of reform or a continuation of the gradual implementation."
Ongoing government efforts to boost the efficiency of state-owned enterprises will help most of them boost EBITDA faster than credit growth in 2018, Kai Hu, another Moody's official, said.
The agency has a stable outlook for Chinese banks, despite deteriorating liquidity and profitability, as more coordinated policy measures to curb shadow banking are set to mitigate asset risks.
