At the end of January, the People’s Bank of China granted American credit rating agency S&P Global a licence to begin rating the creditworthiness of bonds traded on China’s interbank markets. The ratings agencies Moody’s and Fitch are likely to follow.
The government hopes that the presence of international ratings agencies will encourage competition, bring credibility to the credit assessments of Chinese firms and create a new wave of foreign investors in China. Local credit assessment agencies are currently seen as handing out excessively high credit scores to their clientele. Some of the pressure to let the major players onto the Chinese market also comes from the current trade war and China’s growing need to finally deliver on its commitments to open its markets to the world.
The Chinese operating environment is difficult for credit ratings agencies. In recent months, for example, there have been several situations where companies that appeared solvent on paper could not service even minor debts.