CHINA’S economic restructuring is picking up pace, with its manufacturing sector showing signs of a shift to higher value-added areas — a credit positive, analysts at Moody’s Investors Service said yesterday.

China has been cutting excess capacity in heavy industry in recent years to revive profitability in the sector and reduce high debt levels, while encouraging factories to shift to higher-value production such as robotics and aerospace under its “Made in China 2025” initiative.

“If such measures lead to a reallocation of labor and capital resources that shift credit towards sectors with higher productivity growth, it will support the Chinese Government’s credit quality by increasing its debt-carrying ability,” Marie Diron, managing director of Moody’s Sovereign Risk Group, said at a conference in Beijing.

But Diron cautioned that liabilities of State-owned enterprises continue to outpace economic growth, even as authorities have been making some progress in reducing risks in the financial system.

China and the rest of Asia also continue to face external risks such as punitive U.S. trade measures, as China remains reliant on technology supplies from the United States and other advanced economies in the short term, according to a presentation by Moody’s at the conference.

But in the longer term, China will stay focused on developing high-tech sectors, with or without U.S. supplies, as they are key to its growth plan, said Lillian Li, vice president at Moody’s Credit Standards and Research Group.

“China has the financial and policy levers to pursue this plan, and sustained higher public-sector spending would not materially alter its fiscal strength and sovereign credit profile,” Li said.(SD-Agencies)