China's reopening will support companies' credit quality as it will ramp up their earnings with a rebound in domestic demand and economic activity, said Moody’s recently.
Most companies' operational efficiency will improve and operating costs along the supply chain will reduce, the credit rating agency noted.
Sectors that suffered the most during the pandemic, such as tourism and other business and consumer services, will likely lead the rebound, and benefit from the government's focus on boosting domestic consumption, said Kai Hu, a Moody's Senior Vice President.
Meanwhile, demand for consumer durables such as technology hardware would recover from the low base in 2022, Hu added.
Property sector weakness will continue to weigh on related industries along the supply chain such as building materials, according to Moody’s.
While China’s reopening might marginally improve housing sentiment, homebuyers have lingering concerns about property price trends, income stability and incompletion risk, the firm pointed out.
In addition, government support measures will support a gradual, but not a V-shaped, recovery of sales in 2023, Moody’s predicted.
However, China might still face challenges coming from other parts of the world.
One of the issues is the global economic slowdown.
Slower global growth would dampen demand for Chinese exports in 2023 and keep it sluggish in 2024, the firm said.
Another risk would come from geopolitical developments, which could threaten industries like technology and manufacturing, the firm added.
These factors, alongside lingering consumer and investor concerns, could prevent some companies from maintaining their growth momentum beyond this year, Moody’s noted.