- CNTV English - CCTV News

Ministry of Railways maintains triple-A credit rating

08-16-2011 08:08 BJT

Watch Video

Play Video

China's credit rating agency, Dagong Global Credit, defends its stance that China's Ministry of Railways deserves to maintain its triple-A credit rating. Dagong says the ministry has an "extremely strong" ability to repay its debts. Analysts however are somewhat skeptical of the generous grade in light of the recent high speed railway accident as well as the total amount of debt the government agency has on its books.

Last week Dagong Credit Rating Agency gave the Ministry of Railways a triple-A credit rating, the best possible rating any entity can receive. The decision left markets in doubt as the agency is already heavily indebted with a debt to asset ratio reaching nearly 60 percent, and rising. The high profile dismissal of the former minister of railways earlier this year on corruption charges and the high-speed railway accident last month have further added to the skepticism of the operational efficiency and credibility of the ministry.

Dagong however defended its decision, saying that the ministry's ability to service its debt is backed by revenue from the central government, should it fall into default, the government will pay from its own coffers. Dagong also says concerns about falling revenue from cuts in ticket prices on affected lines will not be large enough to hurt the ministry's ability to repay. It adds that the decline in revenue will be offset by an increase in demand from cheaper ticket prices. Also the decision from China's State Council to lower the speeds of the country's bullet trains will cut costs related to train maintenance.

Although the ministry does have the backing of the central government, analysts say it has become more difficult for it to borrow money due to tightened market liquidity as well as rising concerns over the ministry's heavy debt burden. What seems to put analysts even more on edge, is that the ministry has a rating that's one level above China's sovereign debt, currently rated by Dagong at double-A plus.

The higher the credit rating the lower the borrowing costs, but the ministry recently issued 20 billion yuan worth of three-month bills yielding close to 5.6 percent, a relatively high rate for short term government debt. It indicates that markets might not be abiding by the triple-A rating given to the ministry by Dagong.


Editor:Zhang Dan |Source: CNTV.CN

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program