HONG KONG, 8 January 2021 Pengyuan International has assigned the global scale foreign-currency issuer credit rating (ICR) of ‘AA’ and local-currency ICR of ‘AA+’ to the Beijing municipal government, reflecting Beijing’s outstanding economic performance, solid budgetary strength, light debt burden and abundant liquidity, as well as its unique importance to the central government of China. The outlook is stable.
Beijing is the capital of China (AA/AA+, stable) and a municipality under the direct administration of the central government, and operates with the same administrative status as a province. Situated at the northern apex of the roughly triangular North China Plain, Beijing is mostly surrounded by the Hebei province with the exception of neighbouring Tianjin to the southeast. Beijing is a world-famous ancient capital and a modern international metropolis, covering an area of 16,410 square kilometres. The city administers 16 districts and has a population of 21.5 million based on the end-2019 data.
As the political and cultural centre of China, Beijing has its unique importance to the country, possessing a solid scientific foundation as well as a developed economy.The city had a GDP per capita of RMB164,218 in 2019, the highest among 31 provincial-level regions in the mainland China. High-end industries including finance, industrial, information service and scientific sectors are the key contributors to the city’s economy, many of those are thriving to maintain a leading position nationwide. As a well-developed city, the GDP growth of Beijing has been generally slowed down since 2010 and was at 6.1% in 2019. Despite the coronavirus pandemic’s outbreak, the city’s economy has shown strong resilience, evidenced by a positive growth in the first three quarters of 2020. We believe the city’s long-term economy is promising on the back of its competitive industries, friendly business environment, large inflow of talents as well as the development of the Beijing-Tianjin-Hebei region and the Beijing Pilot Free Trade Zone.
Despite fluctuations seen in the Beijing’s budgetary revenue caused by land sales over the past few years, the city’s budgetary strength remains solid among its peers. Supported by its high ability to extract revenue from its robust economy, the Beijing government is highly financially self-sufficient and possesses a solid revenue base. In 2019, the city’s budgetary revenue per capita was RMB42,581, ranking the third highest among its peers. In addition, the government managed its revenue and expenditure well with a light deficit burden even with the pandemic’s impact.
Beijing’s debt burden is at the lower end in China and is likely to remain light in the foreseeable future. The Beijing government’s debt to revenue ratio was only 100% in 2019, ranking the second lowest among its peers. Moreover, the growth of the government’s debt is rather slow nationwide. The developed city’s investment on public infrastructure has been relatively small and growing slowly over the past few years, not to mention its large revenue base which should be able to provide support.
We consider the Beijing’s liquidity to be superior to most of its peers. The fiscal deposit of Beijing is estimated to be amounted to RMB150 billion at the beginning of 2021, which will be sufficient to cover its debt principal and interest payments for the year. In addition, Beijing has strong refinancing ability and its government direct debt was only 54.4% of the municipal debt ceiling in 2019, implying that the government is of a great capability in bond issuance. We estimate Beijing’s liquidity coverage ratio to rank the third highest among its peers.
Note: Ratings mentioned in this press release are unsolicited ratings.
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Date of Relevant Rating Committee: 21-Dec-2020
Additional information is available on www.pyrating.com
Unsolicited ratings – non-participative rating – not disclosed
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