China fell two notches to 19th place in a ranking of sovereign credit risk by BlackRock, one of several emerging market countries to see their current account balances worsen in the second quarter.
China’s current account surplus has fallen from more than 10% in 2007 to 2.6% last year, according to the IMF. However, the country has foreign reserves of $3.4 trillion (€2.6 trillion), which help protect it from external funding pressure.
Venezuela suffered a more severe worsening in its external financing position, according to BlackRock, while Indonesia, Egypt and Thailand all suffered to a lesser extent than China.
“Emerging market investors got a wakeup call in June, with currencies, debt prices and equities tumbling on fears of a funding crisis,” says a report by the BlackRock Investment Institute.
BlackRock moved Austria up three notches to 16th place in the rankings after to an improvement in its projected structural surplus and stronger external finances. The firm also promoted Ireland and Spain, arguing that fiscal austerity in each country is leading to healthier budget outlook.
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