Europe, Middle East, Africa have high risk exposure to China’s slowdown – Moody’s

The mining sectors of Europe, Middle East and Africa (EMEA) face the most exposure to China’s expected economic slowdown followed by oil & gas, shipping, chemicals and auto manufacturing, according to Moody’s Investors Service.

In a new report titled “Non-financial corporates – EMEA: Impact Of China Economic slowdown Is Significant for Some, Immaterial for Most”, the rating agency estimates that about 20 per cent to 30 per cent of Europe, Middle East and Africa’s mining output revenues, is exported to China both directly and indirectly.

“Metal and mining companies are most exposed both in terms of export volumes and the knock-on effect of lower prices. The oil and gas sector has indirect exposure owing to the impact of weaker demand on prices, while the shipping industry will feel the side effects of lower demand for imports of raw materials and lower exports”, the agency said on Tuesday.

Manufacturing, retail, restaurants, media, utilities, beverages, packaged consumer goods and services are expected to suffer modest exposure.

“The impact of developments in China for many EMEA sectors, such as tobacco, telecoms, real estate, healthcare, railways and airports, will be negligible. While these sectors are not irrelevant to the Chinese economy, they tend to be more regionally focused, so any exposure is too minimal to affect their creditworthiness”, Richard Morawetz, a Moody’s Group Credit Officer for the Corporate Finance Group said.

China’s GDP growth forecast for 2015 is 6.8 per cent and Moody’s says despite China’s slowdown, its economic growth “remains significantly ahead of most other developed countries” and is expected to do so.

By Emmanuel Odonkor