China Opens to Foreign Credit Raters to Boost Bond Credibility
S&P becomes the first outside rating agency in a market hit by defaults.
This should be a great time to get into the credit analysis business in China. Policymakers in what will soon be the world’s second-largest bond market are inviting more international investors to pile in. And there should be plenty of demand for guidance now that authorities are allowing a record number of borrowers to default—a big change from just a few years ago. Yet foreign ratings companies may find China a tricky market to assess.
When it comes to the Chinese debt business, nothing is simple. Take the case of China Minsheng Investment Group, one of the country’s largest private-sector borrowers. CMIG, whose interests span real estate to renewable energy, failed to make payments to bondholders at the start of February. While the group later made good on the payments, local media report that it’s now in talks with creditors to maintain solvency. Shanghai Brilliance Credit Rating & Investor Service had CMIG’s bonds at AAA before the missed payment and kept them at the top grade even after the fact. Shanghai Brilliance declined to comment on the rating.