On Feb 17, researchers from the ASEAN 10+3 Macroeconomic Research Office (AMRO) paid a visit to Dagong Group, exchanging views on the issues like the Chinese corporate debts with the research team of Dagong as presided by Mr. Xu weixiong, CEO of Dagong Credit Rating Co. Ltd. and Dagong Overseas Investment Co. Ltd. The two sides exchanged thoroughly their opinions on the corporate debt levels, credit expansion and financial status of the country. The talk with Dagong is a continuation of the series interviews held by AMRO with China Academy of Social Science (CASS), the State-owned Assets Supervision and Administration Commission of the State Council, the National Association of Financial Market Institutional Investors (NAFMII), the Central Bond Registration and Settlement Co. Ltd and the Development Research Center of the State Council (DRC).
As expressed by the researchers from AMRO, Dagong is one of the most influential credit rating agencies in China, the uniqueness and originality of Dagong rating methodology may provide precious reference to the macroeconomic monitoring as conducted in AMRO.
Staffs responsible for Dagong research team introduced the Dagong rating principle and methodology, questions raised by AMRO researchers were explained and clarified. The talk highlighted on the forecasting of the corporate debt level and financial stability. As pointed by Dagong researchers, the driving forces behind the pileup of Chinese corporate debt is a combination of comprehensive factors. Structurally, the State-Owned Enterprises face the heaviest debt pressure, which can only be mitigated via reform to slow down the debt growth rate. The stockholding system reform, the technological and market-oriented reform together play pivotal roles in promoting the economic transition of the country. Year 2017 and 2018 will be the hard times of the economic transition, but would be followed by more stable economic growth thereafter.
The two sides also discussed and analyzed issues such as convertible debt, risks in shadow banking products etc. Researchers of AMRO shared their perspectives on Chinese economy, they pointed out China’s economic transition relies mainly on domestic demand and export. On the micro level, restructuring of SOE may enhance the efficiency; and on the macro level, redistribution of the state-owned capital may improve the efficiency of asset allocation, promoting the transitional process of the economy.
Advocated by finance ministers from ASEAN (10 countries)+3 (namely China, Japan and Korea), AMRO was set in April 2011, in Singapore. Its routine jobs include the monitoring of the member countries’ macroeconomic and financial running status, providing to Chiang Mai Initiative Multi-lateralization (CMIM) policy suggestions during crises, and supervising the utilization of relief funds.