HONG KONG, 29 September 2021. Pengyuan International has affirmed the global scale long-term foreign-currency issuer credit rating (ICR) of ‘A’ for the Henan provincial government and aligned the long-term local-currency ICR with its foreign-currency ICR as A. The outlook is stable. The ICR is attributed to the province’s large economic scale, moderate deficit level and weakness in the debt and liquidity management.
Henan is situated in the middle of China (AA, stable), bordering the provinces of Anhui, Hubei and Hebei. The province covers an area of 167,000 square kilometres, accounting for 1.73% of China’s land area. Henan has a population of 99.4 million in 2020, being the third most populous province in China.
Henan’s rapid economic growth over the past few years had gradually increased its GDP to RMB5.5 trillion (USD798 billion) in 2020, ranking at the fifth among its peers. The sizeable GDP scale enhanced the robustness of the province’s budgetary revenue, which was RMB1.3 trillion in 2020. The large economic and revenue scale should help the province to sustain debts and withstand unexpected risks, such as the extremely heavy rainfall that happened recently in July and temporarily hindered the province’s agriculture production and relevant industries. Buoyed by its large economic size and diversified economic structure, the province’s economy has quickly recovered.
Henan’s budgetary revenue has increased steadfastly over the past few years and the province expanded its budgetary expenditures judiciously while maintaining moderate deficits. The budgetary balance to revenue ratio of Henan was estimated to be -14.4% in 2020, which was moderate in the country. Moreover, we expect the deficit of Henan to narrow slightly in 2021, tracking the substantially recovered budgetary revenue and stable expenditure in the first half of the year.
We believe the economic development of Henan has slowed in recent years. Since the growth of traditional industries has stagnated while the new-cultivated emerging industries are in their infancy, the momentum of the province’s economic growth is not as robust as in previous years. The province registered an economic growth of 1.3% in 2020, slower than the national growth for the first time in a decade. This was followed by a year-on-year GDP uptick of 10.2% in the first half of 2021, still slower than that of the nation. In addition, the lower proportion of working-age population signified by its high total dependency ratio (57.8%) does not bode well for Henan’s long-term economic prospects.
The province has exposed some weaknesses in its debt and liquidity management ability through the default of Yong Mei, a major local state-owned company in 2020. The default had raised an alarm bell for Henan’s systematic liquidity management manner. While the general liquidity sources of the province should be sufficient based on our assessment, the allocation and management of its liquidity sources could have been inefficient and ineffective.
Note: Ratings mentioned in this press release are unsolicited ratings.
Jameson Zuo, FRM
+852 3615 8341
Ke Chen, PhD
+852 3615 8316
+852 3615 8339
Ms. Charley Lui
Direct：+852 3615 8296
RATING SERVICES ENQUIRIES
Mr. Allen Wei
Direct：+852 3615 8324
Date of Relevant Rating Committee: 30-Aug-2021
Additional information is available on www.pyrating.com
Unsolicited ratings – non-participative rating –disclosed – not amended
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