S&P Global gets nod to enter China's bond rating sector

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Jan. 29 (NBD) -- S&P Global's subsidiary in China has received the regulatory nod to enter the Chinese interbank bond market, according to announcements made Monday by the People's Bank of China and  the National Association of Financial Market Institutional Investors.  

This makes S&P Global the first foreign credit assessor to conduct bond rating in China, signifying a high level of opening-up of the country's credit rating market, remarked Yu Chunjiang, deputy director at Golden Credit Rating International Co., Ltd. 

As one of the world's top three credit assessors, S&P Global offers credit rating services to more than 200,000 securities and fund companies around the globe, Financial Times reported. 

According to information from the local industrial and commercial bureau, the China entity of S&P Global was founded in Beijing on June 27, 2018 with a registered capital of 18 million U.S. dollars, and primarily engages in credit rating, credit investigation, and credit assessment services. 

Opening the door to overseas credit ratings companies constitutes an important part of the steady opening-up of China's financial services sector, the country's central bank said.

In March 2018, China began accepting registration applications by foreign credit assessors to assess the quality of bonds independently in the world's third-largest bond market. 

In addition to S&P Global, two other large rating agencies - Fitch Ratings and Moody's Investors Services - have submitted applications to operate independently through their exclusively-owned subsidiaries in China.  

The People's Bank of China said Monday it will promote the further opening-up of the credit rating sector in the next step and encourage more eligible, internationally influential foreign credit rating agencies to enter the Chinese market. 

The introduction of overseas credit rating companies is helpful to meet international investors' demand for yuan-denominated assets and to improve the overall quality of China's rating industry, the central bank stated. 

An industry source told NBD there have been many drawbacks in the domestic rating industry, including default on high-quality bonds, unreasonable credit rating adjustments, and insufficient credit rating hierarchies. 

Allowing foreign credit rating agencies to compete on an equal footing with their Chinese counterparts will pressure the latter to improve their rating capabilities and services and to establish a rating service system targeting foreign investors, Yu Chunjiang noted. 

In the view of He Nanye, contract research fellow at Suning Institute of Finance, the entry of S&P Global, which highly values quality and services, will urge domestic rating institutions to rethink their way of doing business as well as charging mode, as Chinese players now rely largely on price wars to grab market share.  

Currently, how to give full play to advantages of being local and differentiate their business from the competition has become a top priority to domestic credit rating firms, Yu added.

 

Email: lansuying@nbd.com.cn