S&P Global Gets Approval for China Local Rating Business

(Bloomberg) -- Chinese regulators have allowed S&P Global Ratings’ Beijing-based unit to conduct credit rating business on the mainland, according to statements from the People’s Bank of China and S&P.

• The credit assessor is now allowed to register for bond rating service in China’s interbank market. The PBOC didn’t mention Moody’s Investors Service and Fitch Ratings in its announcement on Monday.
• It’s the first time a company wholly owned by an international credit rating firm has been able to rate domestic Chinese bonds, S&P said.

Key Insights

• The introduction of international rating firms will meet foreign investors’ demand for various yuan-denominated assets and improve credit rating quality in the domestic market, the central bank said in the statement.
• The PBOC supports further opening-up of the rating industry and will tighten regulations for credit assessment in China, it said.
• China opened the door for overseas ratings firms in 2017 as a way to speed up reform and foster competition in the domestic bond market.
• S&P said last year it’s studying a credit-ratings scale tailored for China as part of its application to secure a license to rate bonds in the country.
• “International credit raters will take time to get local clients and they will also face the issue of lower fees for rating services in China, hence we expect limited impact on local peers for now,” said Lv Pin, a credit analyst at CITIC Securities Co.

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• In China, about 97 percent of 1,741 non-financial corporate bonds had ratings of AA or above, according to a Nov. 6 statement from National Association of Financial Market Institutional Investors (NAFMII).
• Dagong Global Credit Rating Co. was banned last year from assessing bonds after the firm offered consulting services to borrowers with high fees.
• Moody’s and Fitch have both launched wholly-owned subsidiaries in China that are dedicated to the nation’s domestic bond market. Moody’s didn’t immediately reply to an email seeking comment on whether they’ve also secured an approval for conducting rating business in China while Fitch said it’s “communicating closely with the regulators” after applying for onshore rating licence.

Earlier stories:

• China Bond Rating Shakeup Seen Taking Time Despite Foreign Push
• China Local Credit Rating Quality Deteriorated, Regulator Says

--With assistance from Tongjian Dong and Jing Zhao.

To contact the reporter on this story: Lianting Tu in Hong Kong at ltu4@bloomberg.net

To contact the editor responsible for this story: Neha D'silva at ndsilva1@bloomberg.net

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