CROSS-SECTORSECTOR COMMENT 12 December 2016ContactsBenjamin S. Garber 1.212.553.4732 Asst Dir-Economist benjamin.garber@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market CommentAsia Economic Commentary: Chinas Evolving State Support Heightens Value of Standalone Credit Strength Strong central government support is a crucial component of the credit quality of many Chinese corporations. Even so, traditional analysis of fundamentals and market-based risk signals provides valuable measures of a Chinese business entitys standalone credit strength. This information is especially useful as the Chinese state adjusts its promises of corporate backing. Understanding the diverse elements that promote borrower solvency of Chinese companies is now of particular importance as default risk rises there alongside slower economic growth. With the domestic local currency market holding a dominant share of corporate lending, access to this market will determine the contours of Chinas industrial future.MOODY'S ANALYTICS CROSS-SECTOR2 12 December 2016 Market Comment: Asia Economic Commentary: Chinas Evolving State Support Heightens Value of Standalone Credit StrengthMarket signals diverge significantly from agency ratings The over 100 Chinese industrial firms classified as central state-owned enterprises (SOEs) receive the firmest promise of government support. As policy evolves away from backing local government-owned enterprises and firms in non-strategic industries, the most important companies among the central owned group stand apart in terms of enhanced credit guarantees. Such state credit enhancement is factored into Moodys Investors Services rating of SOEs, lifting the primary rating of select firms above the Moodys measure of standalone credit strength.An alternative market-based measure of standalone credit strength is derive...
