OREANDA-NEWS. Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of China Development Bank Corporation (CDB), Agricultural Development Bank of China (ADBC), and Export-Import Bank of China (ExIm) at 'A+' with Stable Outlook. The banks' Short-Term IDRs have also been affirmed at 'F1'. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS - IDRs, SUPPORT RATINGS, SUPPORT RATING FLOORS AND SENIOR DEBT

The ratings, which are equivalent to that of China's sovereign ratings (A+/Stable/F1), are based on an extremely high probability of the central government supporting the banks in a timely manner in the event of stress. This reflects the entities' important policy functions to promote strategic development in China's economy, their 100% state ownership and a long history of support from the central government for the banks. Since the banks effectively act as agents of state policy, no Viability Ratings are assigned.

All three policy banks play an important role in national economic development by providing financing in key areas: CDB for domestic infrastructure projects and pillar industries; ADBC for procurement of agriculture goods and rural development projects; and ExIm for the growth of external trade. In addition to these core policy functions, CDB and ExIm provide financing for strategic overseas investments and resource purchases on behalf of the state.

Reflecting their policy roles, the banks' asset growth, which is controlled by the state, remains rapid in order to sustain China's economic growth and support economic transformation. On average, about 92% of the banks' asset expansion since 2008 comprised lending. Loans accounted for about 85% of total assets on average at each of the three policy banks. Fitch believes the reduction in the reserve requirement ratio (RRR) at ADBC in February 2015 is likely to drive more new credit towards rural infrastructure projects.

The entities' quasi-sovereign status is reflected in a zero risk weighting applied to all bonds issued by the policy banks. China's banking regulator has set the risk-weighting of bonds issued by CDB at zero at least up to end-2015. Only CDB has been converted into a joint-stock company as part of the reform to "commercialise" the policy banks. Fitch believes there is no tangible plan to transform ADBC or Exlm in the foreseeable future.

RATING SENSITIVITIES - IDRs, SUPPORT RATINGS, SUPPORT RATING FLOORS AND SENIOR DEBT

The IDRs of the three policy banks will likely move in tandem with the sovereign ratings. However, negative rating action would also be taken should there be any change in the perceived ability and/or willingness of the state to support the banks. Examples of such would include a reduction in government ownership, a material change in banks' policy role (such as commercialisation of their operations) and/or changes in the support mechanism that affects the banks' relationship with the state.

The rating actions are as follows:

China Development Bank Corporation:
Long-Term Foreign-Currency IDR affirmed at 'A+'; Stable Outlook
Short-Term Foreign-Currency IDR affirmed at 'F1'
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A+'
USD1bn 5% global senior unsecured notes due 2015 affirmed at 'A+'

Agricultural Development Bank of China:
Long-Term Foreign-Currency IDR affirmed at 'A+'; Stable Outlook
Short-Term Foreign-Currency IDR affirmed at 'F1'
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A+'

Export-Import Bank of China:
Long-Term Foreign-Currency IDR affirmed at 'A+'; Stable Outlook
Short-Term Foreign-Currency IDR affirmed at 'F1'
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A+'
USD1bn 4.875% senior unsecured notes due 2015 affirmed at 'A+'