Dun & Bradstreet – the world’s largest business information company – has upgraded China’s risk rating from ‘deteriorating’ to ‘stable’, as efforts to mitigate the economic impact of coronavirus prove successful.
Following the initial outbreak, Dun & Bradstreet downgraded the risk rating in mainland China by two quartiles and has continued to monitor the situation closely for fluctuations. Markus Kuger, Chief Economist at commercial data and analytics firm, Dun & Bradstreet explains how the financial impact of the pandemic is still emerging, however, and why the downturn in the Western world is likely to halt China’s economic growth: “In February Dun & Bradstreet downgraded our Country Risk Rating for Mainland China by two quartiles in response to the economic impact of the coronavirus outbreak and our initial analysis. We have been monitoring the situations closely and have taken the decision to upgrade the rating outlook from ‘deteriorating’ to ‘stable’ as disease control efforts appear to have been successful, at least in the short-term, and the country is showing signs of recovery. Following analysis of the available data and analytics, we have upgraded China’s Supply Environment Outlook to from ‘red’ to ‘amber’, with a stable outlook, and its Market Environment Outlook from ‘deteriorating’ to ‘stable’. However, given the intense economic depression impacting many of China’s leading trade partners as lockdown and disease control measures bite, our short-term economic outlook for China is still ‘deteriorating’, given the relationships with other impacted countries.
“The ﬁnancial effects of the coronavirus outbreak across all provinces in February and March are still emerging, with new waves of consumer and small business defaults due. Q2 growth expectations across the OECD’s member countries are moving into deeply negative territory, implying double-digit year on year contractions in output in North America and Europe. As such, we expect the export and import of Chinese goods and services to deteriorate into Q3 at rates outpace the contractions seen in trade volumes and values during the 2008-09 global ﬁnancial crisis. We will continue to monitor the situation and adjust our country risk ratings as appropriate.
“The fall in the prices of the raw materials that China imports annually – close to a quarter of its imports of goods by value in 2018 – will support nominal GDP and the balance of payments. But as the commercial and business districts of the Western world fall silent and their lockdowns and disease control efforts continue, we anticipate the net effect will be to halt Chinese economic growth.”