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Oil price decline squeezing Chinese non-property companies: Moody's

Xinhua, March 4, 2015 Adjust font size:

Chinese corporates outside of the property sector will be challenged over the next year by the fall in oil prices and increased competition, according to a Moody's report published on Wednesday.

Department stores, food and beverage manufacturers, and Chinese factories will face increased competition over the next 18 to 24 months, it said.

"We expect department stores will reposition themselves as lifestyle centers to counter increasing competition from shopping malls and the Internet," said Lina Choi, a Moody's vice president and senior analyst.

She added that the ability to innovate and improve their products will be crucial to maintaining food and beverage manufacturers' profitability.

Furthermore, Moody's said that lower crude oil prices will materially reduce profits and cash flows for China's three national oil companies, and pressure the revenue growth and margins of the four oilfield services companies that Moody's rates.

However, it expects the three national oil companies' Aa3 ratings to remain intact due to strong government support in light of their strategic importance to the Chinese government.

In addition, ongoing overcapacity -- amid a slowdown in demand -- will affect steel and cement producers, but Moody's expects the Chinese government to increase infrastructure investment to mitigate weakening demand from the property sector. Endi