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Shanghai Tyre receives downgrade

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Shanghai Tyre & Rubber Co. Ltd.'s long-term credit rating has been dropped from B-(pi) to C(pi) by Xinhua Far East China Credit Ratings, which ranks the credit risk of Chinese companies using international standards.

Xinhua Far East says its decision was based on two factors:

1. Shanghai Tyre's overdue debt "that is pending roll over. As of mid-2003, the company's overdue debt accounted for 4% of (its) gross debt, of which several overdue loans had been recorded for two or three consecutive years."

2. Shanghai Tyre's "substantial losses at end (of) 2002, and its current liabilities in far excess of its current assets."

Xinhua Far East recognizes that due to "vigorous market demand for radial truck tires in 2002 and the first half of 2003, as well as (Shanghai Tyre's) good performance resulting from its recent acquisition of Shanghai Soap Group," the Chinese tiremaker's gross margin increases.

"However, since the company has excessively high expenditures and debt burden while it is exposed to the risks of contingent losses, it is very challenging for the company to significantly lower its financial risks in the next three years."

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